EPCG exemption and natural justice require disclosure of adverse material before confirming duty demand

Exemption under the EPCG scheme depended on proof of export obligation fulfilment, and the demand could not be confirmed on an undisclosed adverse DGFT communication. The assessee had sought redemption, produced a chartered accountant's certificate supporting compliance, and there was nothing showing contemporaneous intimation of deficiencies in the DGFT application. The Tribunal held that the authority should have evaluated the available record pragmatically, considered secondary evidence where primary evidence was unavailable, and followed natural justice before denying the exemption. The demand was set aside and the matter remanded to await the DGFT certificate.

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Issues: Whether the confirmation of duty demand by denying exemption under the EPCG notification could be sustained when the assessee claimed fulfilment of export obligation and the adverse DGFT communication was not furnished for rebuttal.

Analysis: The exemption claim turned on fulfilment of export obligation under the EPCG scheme and the notification governing the import of capital goods. The record showed that the assessee had applied for discharge/redemption and had produced a chartered accountant's certificate supporting fulfilment. The adverse communication relied upon by the lower authority was not disclosed to the assessee for explanation or rebuttal. The material before the Tribunal also indicated that the application submitted to the DGFT contained the relevant enclosures, and there was no contemporaneous intimation of deficiencies. In these circumstances, the Tribunal held that the adjudicating authority should have assessed the available material pragmatically, considered secondary evidence where primary evidence was unavailable, and complied with natural justice before confirming the demand.

Conclusion: The confirmation of demand was not sustainable. The impugned order was set aside and the matter was sent back for the lower authority to await the DGFT certificate.

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