EPCG default beyond importer control: confiscation and penalties were treated as unsustainable where duty was already secured.

Import of capital goods under EPCG concessional duty treatment does not justify confiscation, redemption fine, penalties or interest where export obligation could not be fulfilled because of circumstances beyond the importer's control and the duty liability had already been secured before the show cause notice. The text notes that the importer could not establish the industry or complete exports due to the collapse of the Korean economy, loss of foreign collaborator support and market competition, and that the department's dues were covered through bank guarantee encashment and TR-6 challan before adjudication. In the cited line of authorities, those facts were treated as sufficient to deny confiscation and consequential monetary consequences.

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Issues: Whether confiscation of the imported machinery, redemption fine, penalties and interest were sustainable where export obligation could not be fulfilled due to circumstances beyond the importer's control and the duty amount had already been secured before issuance of the show cause notice.

Analysis: The appellants imported capital goods under concessional duty treatment under EPCG Notification No. 110/95 and were unable to establish the industry or fulfil export obligation because of the collapse of the Korean economy, loss of support from the foreign collaborator, and market competition. The amounts due to the department had already been deposited through bank guarantee encashment and TR-6 challan before the show cause notice under Section 124 of the Customs Act was issued. In the cited line of authorities, such circumstances were treated as sufficient to deny confiscation and consequential monetary penalties where export obligation became impossible and the duty liability stood secured in advance of adjudication.

Conclusion: The confiscation, redemption fine, penalties and interest were not sustainable and were set aside.

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