Amended EPCG licence applies before customs clearance, defeating confiscation, duty demand, fine and penalty for imported machines.

Where EPCG goods had arrived but duty had not been paid and formal clearance had not occurred, an amended licence covering the machines was held applicable because clearance for home consumption arises only after duty payment and permission to clear. On that basis, the importer was entitled to the licence benefit and the customs objections based on non-coverage by the original licence failed. Once the amended licence applied, confiscation under sections 111(d), 111(m) and 111(o), along with redemption fine, duty demand and penalty, could not be sustained because there was no false declaration and no breach of a conditional exemption. The goods were therefore allowed to be cleared under the EPCG scheme.

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Issues: (i) Whether the amended EPCG licence, issued after arrival of the goods but before payment of duty and formal clearance, entitled the importer to the benefit of the licence and the duty concession. (ii) Whether the imported machines were liable to confiscation, redemption fine, duty demand and penalty on the footing that the goods were already cleared or that the licence did not cover them.

Issue (i): Whether the amended EPCG licence, issued after arrival of the goods but before payment of duty and formal clearance, entitled the importer to the benefit of the licence and the duty concession.

Analysis: Clearance for home consumption under section 47(1) of the Customs Act, 1962 arises only after the importer pays the assessed duty and the proper officer permits clearance. Goods merely assessed but not yet put out of customs charge cannot be treated as finally cleared. The amended licence dated 23-8-1999 covered the imported machines, and para 6.6 of the EPCG scheme applied to goods already shipped or arrived where customs duty had not been paid and the goods had not been cleared from customs. Section 49 custody pending clearance did not amount to warehousing in a way that would defeat the amended licence benefit on these facts.

Conclusion: The amended EPCG licence was applicable, and the importer was entitled to its benefit.

Issue (ii): Whether the imported machines were liable to confiscation, redemption fine, duty demand and penalty on the footing that the goods were already cleared or that the licence did not cover them.

Analysis: Once the amended EPCG licence was held applicable, the basis for confiscation under sections 111(d), 111(m) and 111(o) of the Customs Act, 1962 failed. The declared quantity and value were not found false, so section 111(m) was not attracted. Section 111(o) was also inapplicable because there was no clearance under a conditional exemption that had been violated. In the absence of sustainable confiscation, redemption fine could not survive, and no penalty under section 112(a) was warranted. The duty demand based on the contrary premise also could not stand.

Conclusion: The confiscation, redemption fine, duty demand and penalty were unsustainable and were set aside.

Final Conclusion: The order of the Commissioner was set aside and the importer was held entitled to clear the goods under the EPCG scheme without the impugned duty, confiscation, fine or penalty.

Ratio Decidendi: For EPCG imports, where duty has not been paid and the goods have not been finally cleared from customs, an amended licence covering the goods can be applied to the import; in such a case, confiscation, redemption fine and penalty based on non-coverage of the original licence cannot be sustained.

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