EPCG licence imports cannot be revalued by adding separate contract payments to customs assessable value.

Capital goods imported under a valid EPCG licence and covered by the exemption notification could not be revalued by loading payments made under separate operation, engineering and service contracts. The customs authorities were required to verify only whether the imported goods matched the licence and notification conditions; they were not entitled to invoke Section 14 of the Customs Act, 1962 to add unrelated contractual consideration to the assessable value of the imported goods. On that basis, the duty demand, confiscation and penalties were unsustainable, and the impugned order was set aside with consequential relief.

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Issues: Whether capital goods imported under a valid EPCG licence and covered by the exemption notification could be revalued by loading amounts paid under separate contracts, and whether the duty demand, confiscation and penalties could survive on that basis.

Analysis: The imports were covered by a valid EPCG licence and by the exemption notification for capital goods imported free of customs duty. The goods imported under the bills of entry were specifically enumerated in the licence and were not disputed to be capital goods covered by the scheme. In such a case, the Customs authorities were required to verify whether the goods matched the licence and the notification conditions; they were not entitled to invoke valuation under Section 14 of the Customs Act, 1962 to load the assessable value with consideration paid under separate operation, engineering and service contracts. Since the import itself was within the EPCG scheme, the additional contract payments could not be treated as part of the value of the imported capital goods for customs duty purposes.

Conclusion: The loading of value was unsustainable, and the resulting duty demand, confiscation and penalties could not be maintained.

Final Conclusion: The impugned order was set aside in toto and the appeals were allowed with consequential relief.

Ratio Decidendi: Where capital goods are imported under a valid EPCG licence and are covered by the exemption notification, Customs authorities cannot revalue the goods under Section 14 of the Customs Act, 1962 by adding payments made under separate contracts unrelated to the imported goods themselves.

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