EPCG amnesty scheme regularisation bars recovery of customs penalty once duty forgone and interest are paid

Payment of the duty forgone and interest under the EPCG amnesty scheme regularised the export obligation default and triggered closure of the defaulted authorisation on issuance of the discharge certificate. On that footing, the Kerala HC held that the liability arising from non-fulfilment of the export obligation stood discharged, and the importer could not be treated as continuing to retain the scheme benefit for the purpose of imposing a further monetary penalty in lieu of confiscation. The penalty under Section 112(a) of the Customs Act, 1962 was therefore not recoverable, and the demand for recovery was set aside.

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Issues: Whether, after settlement of default under the amnesty scheme for EPCG authorisation holders by payment of the duty forgone and interest and issuance of closure under the scheme, the penalty imposed under Section 112(a) of the Customs Act, 1962 in lieu of confiscation under Section 111(o) of the Customs Act, 1962 could still be recovered.

Analysis: The amnesty scheme applied to pending and even adjudicated cases of export obligation default under the EPCG scheme and contemplated regularisation on payment of the exempted customs duty proportionate to the unfulfilled export obligation together with interest. It also contemplated issuance of an Export Obligation Discharge Certificate on proof of such payment. The Court held that once the petitioner paid the entire duty foregone along with interest and the default stood regularised under the scheme, the liability arising from non-fulfilment of the export obligation stood discharged. On that basis, the Court reasoned that the petitioner could not be treated as having continued to retain the benefit of the EPCG scheme so as to sustain a further monetary liability by way of penalty in lieu of confiscation.

Conclusion: The penalty imposed under Section 112(a) of the Customs Act, 1962 was held not recoverable from the petitioner and the demand for its recovery was set aside in favour of the assessee.

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