EPCG compliance investigation may continue despite discharge certificates, with seized vehicles released only on protective security conditions.

Customs authorities may investigate alleged non-fulfilment of EPCG export obligations even where the DGFT has issued discharge certificates, because those certificates do not by themselves bar examination of whether the import conditions were actually complied with. In the absence of a statutory bar, mala fides, or collateral purpose, writ interference at the investigation stage is premature. The Court also accepted that seized cars could be released pending investigation on safeguards, including a bank guarantee for differential duty and a bond for possible penalty and redemption fine, while preserving the revenue's interests. The challenge to the investigation was rejected, but conditional interim release was allowed.

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Issues: (i) Whether the Directorate of Revenue Intelligence could investigate alleged non-fulfilment of the export obligation under the EPCG Scheme despite discharge certificates issued by the DGFT; (ii) whether the seized cars should be released to the importer pending the investigation.

Issue (i): Whether the Directorate of Revenue Intelligence could investigate alleged non-fulfilment of the export obligation under the EPCG Scheme despite discharge certificates issued by the DGFT.

Analysis: The import under the EPCG Scheme was subject to the condition that the capital goods be actually put to use in the importer's business and that the export obligation be fulfilled in accordance with the scheme. The existence of discharge certificates did not, by itself, bar customs authorities from examining whether the underlying conditions of import had in fact been observed. The Court found no statutory bar to the investigation and no material showing mala fides or collateral purpose. Interference in writ jurisdiction at that stage would have been premature because the investigation was directed only to ascertaining whether the imported vehicles had been used for the business activity for which they were imported and whether confiscation under the Customs Act could arise.

Conclusion: The investigation by the Directorate of Revenue Intelligence was held to be competent and was not quashed.

Issue (ii): Whether the seized cars should be released to the importer pending the investigation.

Analysis: The Court accepted that continued detention would cause depreciation and that the revenue's interest could be secured by appropriate conditions. Since the investigation itself was not being interdicted, interim release could still be ordered on safeguards protecting possible duty, penalty, and redemption fine liabilities.

Conclusion: The seized cars were directed to be released to the importer on furnishing a bank guarantee for the differential duty and a bond for the penalty and redemption fine, if levied.

Final Conclusion: The writ petition succeeded only to the limited extent of obtaining conditional release of the seized cars, while the challenge to the investigation was rejected.

Ratio Decidendi: Customs authorities may investigate alleged breach of import conditions under the EPCG Scheme notwithstanding a discharge certificate issued by the licensing authority, and writ interference is unwarranted absent jurisdictional error or mala fides.

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