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Issues: (i) Whether confiscation of EPCG-imported capital goods and imposition of penalty were justified for alleged non-fulfilment of export obligation; and (ii) whether the duty foregone with interest was recoverable.
Issue (i): Whether confiscation of EPCG-imported capital goods and imposition of penalty were justified for alleged non-fulfilment of export obligation.
Analysis: The imports were made under the EPCG scheme against a prescribed export obligation, but the record did not satisfactorily establish completion of the statutory sequence required before invoking confiscation. The notification contemplated installation of the capital goods and production of the requisite certificate within the stipulated period, and the absence of clear evidence on that aspect made the action to confiscate the machinery premature. In the circumstances, and in view of the Tribunal's earlier view that such drastic measures are not warranted on similar EPCG defaults, the heavy penal action was not justified.
Conclusion: Confiscation, redemption fine, and penalties were set aside.
Issue (ii): Whether the duty foregone with interest was recoverable.
Analysis: The appellants had not fulfilled the export obligation and did not dispute the liability arising under the EPCG framework for recovery of the customs duty concession availed, together with interest at the stipulated rate. The imported goods were otherwise dutiable, and the scheme itself provided for recovery of the duty benefit with interest upon failure to fulfil the obligation.
Conclusion: The duty demand with interest at 24% was upheld.
Final Conclusion: The demand of customs duty with interest survived, but the confiscation, redemption fine, and penalties did not; the appeals were allowed only to that extent.
Ratio Decidendi: Under the EPCG scheme, where the statutory conditions for completion of import and installation are not shown to have been fulfilled, confiscation and penalty cannot be sustained as a premature measure, but the duty concession availed remains recoverable with the stipulated interest on failure to discharge export obligation.
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