Export obligation discharge certificates prevent Customs from denying exemption benefits or sustaining duty demand on the same default.

Under the advance authorisation scheme, once the DGFT regularises a shortfall in export obligation and issues Export Obligation Discharge Certificates, Customs cannot independently deny the benefit of Notifications No. 96/2009-Cus. and 99/2009-Cus. on the same alleged breach. The discharge certificates confirm compliance for the scheme, and Customs cannot re-open the accepted obligation or sit in appeal over the licensing authority's determination. Where the bonds executed for the authorisations are cancelled after such regularisation, a duty demand under Section 143 of the Customs Act, 1962 does not survive, and the connected interest and penalty also fall with the principal demand.

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Issues: (i) Whether the Customs authorities could demand duty for alleged non-fulfilment of export obligation under Notifications No. 96/2009-Cus. and 99/2009-Cus. when the DGFT had regularised the shortfall and issued Export Obligation Discharge Certificates. (ii) Whether the demand, interest and penalty could survive under Section 143 of the Customs Act, 1962 after cancellation of the bonds executed in respect of the advance authorisations.

Issue (i): Whether the Customs authorities could demand duty for alleged non-fulfilment of export obligation under Notifications No. 96/2009-Cus. and 99/2009-Cus. when the DGFT had regularised the shortfall and issued Export Obligation Discharge Certificates.

Analysis: The advance authorisation scheme operates within a coordinated statutory framework between the Foreign Trade Policy, the Handbook of Procedures and the customs notifications. The export obligation specified in the authorisation is the obligation that binds the importer, and once the DGFT, being the competent licensing authority, regularises the default and issues Export Obligation Discharge Certificates, the fulfilment of obligation is accepted for the scheme. The Customs authorities cannot adopt a different view on the same obligation or treat the notifications as violated when the licensing authority has already accepted discharge of the obligation. The earlier decisions relied upon reinforce that the Customs Department cannot sit in appeal over the DGFT's acceptance of compliance.

Conclusion: The issue was answered in favour of the assessee. The demand raised on the footing of breach of the notification conditions did not survive.

Issue (ii): Whether the demand, interest and penalty could survive under Section 143 of the Customs Act, 1962 after cancellation of the bonds executed in respect of the advance authorisations.

Analysis: The record showed that the bonds stood cancelled and the export obligations had been regularised by the DGFT. In that situation, enforcement of a duty demand under Section 143 of the Customs Act, 1962 was unsustainable. Once the substantive duty demand itself could not survive, consequential interest and penalties also lacked foundation.

Conclusion: The issue was answered in favour of the assessee. The demand, interest and penalty were held to be unenforceable.

Final Conclusion: The impugned order was set aside and the appeal succeeded with consequential reliefs as available in law.

Ratio Decidendi: Where the DGFT, acting within the Foreign Trade Policy framework, regularises the export-obligation shortfall and issues discharge certificates, Customs authorities cannot independently deny the benefit of the related exemption notifications or enforce a duty demand on the same alleged breach.

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