2025 (9) TMI 763 - AT - Customs

Appellant's SHIS benefit restored, Rs.3.89 crore demand set aside after exporter surrendered EPCG benefit with DGFT regularization

CESTAT KOLKATA - AT allowed the appeal and set aside the demand of Rs.3,89,82,117/- with interest. The tribunal found that DGFT had permitted exporters ... Availment of dual benefit of zero duty EPCG and SHIS by the exporters under the FTP 2009-14 - demand was raised on the allegation that the appellant was liable to reverse the benefit availed under the SHIS scheme only, as they have first availed the zero duty benefit under the EPCG Scheme - HELD THAT:- The issue of simultaneous availment of zero duty benefit under EPCG Scheme and SHIS by the exporters under the FTP 2009-14 was raised by the DRI and highlighted to the DGFT. DGFT examined the issue and issued Public Notice No.30/2015-2020 dated 08.09.2016 wherein it has been clarified that the exporters who have been issued or availed such simultaneous benefits under both the schemes shall be allowed flexibility to choose one of the two schemes and an option to surrender one of the benefits was given. Accordingly, CBEC also, vide Circular No.45/2016-Cus dated 23.09.2016, provided an option to return either of the benefits. The appellant surrendered the benefits under Zero Duty EPCG and paid an amount aggregating to Rs.57,75,000/- [Rs.47,21,193/- towards duty + Rs.10,52,280/- towards interest] on 13.4.2015 and informed the same to Joint DGFT vide letter dated 11.05.2015. On considering the same, the Ld. Additional DGFT has issued duty paid regularization letters, both dated 27.05.2015. Thus, it is observed that the issue has been settled by DGFT by regularising the availment of SHIS benefit. An identical issue has already been decided by the CESTAT, South Zonal Bench, Chennai in the case of Commissioner of Customs, Chennai v. Danieli India Ltd. [2023 (7) TMI 449 - CESTAT CHENNAI] where it was held that 'In the present case, the respondent has not availed any Zero Duty EPCG Authorization for the period 2010-11. The Zero Duty EPCG Authorization is for the period 2011-12. Thus, there is no violation of the conditions.' - the ratio of the decision cited above is squarely applicable in this case. As the appellant has already surrendered the benefits under Zero Duty EPCG and paid an amount aggregating to Rs.57,75,000/-, the impugned order denying the SHIS benefit and confirming the demand of Rs. 3,89,82,117/- along with interest is not sustainable and hence the same is set aside. Appeal allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether an exporter who initially availed simultaneous benefits under the Zero Duty EPCG scheme and the SHIS (Socially Handicapped Industries Scheme) as per FTP 2009-14, and thereafter surrendered the Zero Duty EPCG benefit by depositing duty and interest in terms of DGFT/CBEC notifications, remains liable to have SHIS benefits denied and a demand raised for reversal of SHIS benefit. 2. Whether the DGFT Public Notice and CBEC Circular providing an option to choose/surrender one of the two concurrent benefits can regularise earlier concurrent availment and preclude Revenue from denying the surrendered benefit in adjudication proceedings. 3. Whether the Tribunal should follow prior decisions dealing with simultaneous availment and surrender/regularisation of EPCG and SHIS benefits when determining liability in the present facts. ISSUE-WISE DETAILED ANALYSIS - ISSUE 1: LIABILITY TO REVERSE SHIS AFTER SURRENDER OF ZERO DUTY EPCG Legal framework: The decision turns on the provisions of the Foreign Trade Policy (FTP) 2009-14 and attendant procedures, notifications and public notices governing the SHIS and Zero Duty EPCG schemes; additionally, CBEC Circular offering return/regularisation mechanisms; and the policy purpose to prevent double benefit but also to allow remedial regularisation where provided. Precedent treatment: The Tribunal relied on prior CESTAT precedent addressing identical fact-patterns involving simultaneous availment and subsequent surrender/regularisation of benefits; that precedent was followed. Interpretation and reasoning: The Court observed that DGFT and CBEC had expressly provided an option allowing exporters who had obtained simultaneous benefits to choose one scheme and surrender the other. Where an exporter elects to surrender the EPCG benefit and deposits duty and interest in line with those administrative instructions, and the DGFT issues duty-paid regularisation letters, the concurrent availment is treated as regularised rather than constituting continuing dual benefit. The Tribunal emphasised purposive interpretation of FTP/notifications and associated public notices and procedures rather than a purely literal reading of 'year of issuance' which could produce technical denial of benefits contrary to policy intent. Ratio vs. Obiter: Ratio - where an exporter has availed both SHIS and Zero Duty EPCG but has subsequently surrendered the EPCG benefit by paying duty and interest in accordance with DGFT/CBEC directions and obtained regularisation from DGFT, Revenue cannot sustain a demand by denying SHIS benefit. Obiter - observations on related factual permutations (e.g., timing nuances between years of export and years of issuance) that do not change outcome in the present facts. Conclusion: The demand confirmed by the adjudicating authority denying SHIS benefit is unsustainable where the exporter had surrendered the zero duty EPCG benefit in terms of DGFT/CBEC notices and obtained regularisation; SHIS entitlement stands. ISSUE-WISE DETAILED ANALYSIS - ISSUE 2: EFFECT OF DGFT PUBLIC NOTICE AND CBEC CIRCULAR ON ADJUDICATORY DEMANDS Legal framework: Administrative instructions (DGFT Public Notice and CBEC Circular) issued to address identified simultaneous availment, offering affected exporters an option to surrender one benefit and regularise the other; these instructions interact with Customs notification conditions and FT policy implementation mechanisms. Precedent treatment: The Tribunal treated the administrative remedial measures as determinative where complied with by the exporter and acted upon by DGFT; prior tribunal authority was applied to give effect to such administrative regularisation. Interpretation and reasoning: The Tribunal held that where the policy-making/administrative authority (DGFT) has provided a mechanism to remedy the concurrent availment, and the exporter follows that mechanism (payment of duty and interest; informing DGFT), the administrative regularisation issued thereafter reflects that the conditions of the policy/notification have been satisfied or rectified. Consequently, Revenue's subsequent adjudication cannot re-open a settled administrative regularisation to deny the alternative benefit (SHIS) which was preserved by the surrender and payment. Ratio vs. Obiter: Ratio - administrative remedial measures under DGFT/CBEC, if availed and acted upon with resulting regularisation, preclude Revenue from imposing a contrary demand in adjudication in respect of the benefit retained. Obiter - discussion that the DGFT/CBEC mechanism exists to effectuate policy balance and fairness, and the Court's broader policy comments on purposive reading of FTP provisions. Conclusion: DGFT/CBEC remedial instruments, when complied with and followed by DGFT regularisation, operate to regularise prior simultaneous availment; adjudicatory denial of the benefit retained is therefore not maintainable. ISSUE-WISE DETAILED ANALYSIS - ISSUE 3: ROLE OF PRECEDENTS AND APPLICATION TO FACTS Legal framework: Application of earlier tribunal reasoning on interpretation of notification conditions, interplay between 'year of issuance' and policy purpose, and significance of DGFT clarifications/public notices in construing Customs notification conditions. Precedent treatment: Prior CESTAT decision dealing with materially identical facts and interpretational issues was explicitly followed; the Tribunal found that prior decision's ratio applied squarely to the facts where surrender and payment for EPCG had been made and DGFT had issued regularisation letters. Interpretation and reasoning: The Tribunal adopted the prior decision's purposive approach - treating the restrictions as aimed at preventing simultaneous economic advantage, not at penalising technical sequencing of issue dates - and noted that where DGFT had not cancelled or rejected the authorisations/scrips but had regularised payment, there was no lingering irregularity warranting denial of SHIS. The Tribunal rejected a literal 'year of issuance' reading that would produce an outcome contrary to the policy objective. Ratio vs. Obiter: Ratio - identical prior tribunal authority is binding in approach and outcome; following that authority, the present appeal must be allowed. Obiter - extended comments on semantic versus purposive interpretation of notification language. Conclusion: In alignment with earlier tribunal authority, the facts warrant setting aside the adjudicated demand; precedent supports allowing the retained SHIS benefit where EPCG was surrendered and regularised. OPERATIVE CONCLUSION Given compliance with DGFT/CBEC remedial procedure (surrender of EPCG benefit, payment of duty and interest) and issuance of DGFT duty-paid regularisation letters, the adjudicatory demand denying SHIS benefit and seeking reversal of SHIS scrips is not sustainable; the impugned order is set aside and the appeal allowed with consequential relief as per law.