2026 (2) TMI 44 - AT - Customs

EPCG export obligation counting of hotel food beverage and travel earnings; Customs cannot override DGFT certificate

EODC certification that export obligation under EPCG was fulfilled cannot be second-guessed by Customs in absence of prior DGFT adjudication cancelling ... EODC determinative of fulfilment of export obligation - Counting of hotel, food, beverage and travel earnings towards discharge of EPCG export obligation - Customs authority's jurisdiction to sit in judgment over DGFT-issued certificate - HELD THAT:- In view of the two decisions of the Tribunal in Interglobe [2025 (11) TMI 1460 - CESTAT NEW DELHI] and Bestech Hospitalities [2025 (8) TMI 509 - CESTAT NEW DELHI] it has to be held that the Customs Authorities could not have confirmed the demand in the absence of any adjudication by the DGFT cancelling the EODC certificate earlier issued by it certifying that the export obligation had been fulfilled by the appellant. The confirmation of demand and imposition of penalties upon the other appellants, cannot, therefore, be sustained and are set aside. Issues: Whether Customs authorities could confirm demands, penalties and confiscation in respect of cars imported under EPCG licences after DGFT had issued Export Obligation Discharge Certificates (EODCs) and cancelled the bonds, without any prior adjudication or cancellation of the EODCs by DGFT.Analysis: The Tribunal examined earlier Division Bench decisions which held that where DGFT has issued EODCs and has not cancelled them, the EODCs are determinative of fulfillment of export obligations under the EPCG scheme. The Tribunal noted the DGFT clarification that foreign exchange earnings from hotel, tourism and travel services (including use of imported vehicles) are to be considered for discharge of export obligation where no misuse or transfer is shown. The Tribunal further relied on precedent establishing that Customs cannot ignore or sit in judgment over certificates and licences issued by the licencing authority (DGFT) unless DGFT itself has adjudicated and cancelled those certificates; absence of any cancellation or adjudication by DGFT precludes Customs from confirming demands based on alleged non-fulfillment.Conclusion: The Customs demands, penalties and confiscation confirmed by the adjudicating authority are set aside insofar as they relate to the appeals because DGFT had issued EODCs and there was no adjudication or cancellation of those EODCs by DGFT; the appeals are allowed in favour of the assessee.