EPCG export obligation fulfilled through tourism earnings; EODCs and policy clarifications defeated customs demand, interest and penalties.

Where the licensing authority issued EODCs after being satisfied that the EPCG export obligation had been fulfilled, and the applicable policy clarifications allowed foreign exchange from hotel, travel and tourism activities to be counted, the export obligation was treated as discharged. The record showed that the imported vehicles were used in the appellant's tourism operations, supported by logbooks, and there was no contrary evidence of breach. The later DGFT clarification also noted that, before the 14.06.2006 amendment, there was no requirement that the cars be registered as tourist or commercial vehicles. On that basis, the customs demand, interest and penalties were held unsustainable.

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Issues: Whether the export obligation under the EPCG scheme was fulfilled by the appellant's travel and tourism activities, and whether the EODCs issued by DGFT were determinative so as to make the customs demand, interest and penalties unsustainable.

Analysis: The imported cars were obtained for tour and travel related services, and the record showed that the vehicles were used in the appellant's tourism operations. The DGFT had issued EODCs for two licences and had clarified that the EPCG scheme did not require exclusive earnings from the imported cars, and that foreign exchange earned from hotel, travel and tourism activities could be taken into account for discharge of export obligation. The later DGFT clarification also stated that, prior to the 14.06.2006 amendment, there was no stipulation requiring the cars to be registered as tourist or commercial vehicles, and that alternate earnings in the travel and tourism package could be considered. The customs authorities' reliance on the Surya Samudra line of reasoning was distinguished on facts, and the existence of EODCs, supported by logbooks and the absence of contrary evidence, established completion of the export obligation.

Conclusion: The export obligation stood fulfilled and the DGFT's EODCs were accepted as determinative for that purpose. The customs demand, interest and penalties could not be sustained.

Ratio Decidendi: Where the licensing authority issues an EODC after being satisfied that EPCG export obligation has been fulfilled, and the relevant policy clarifications permit consideration of tourism and allied service earnings, customs cannot sustain duty demand by insisting on a narrower attribution of earnings absent contrary evidence of breach.

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