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 that certificate; relying on CESTAT precedents, the Customs demand and penalties based on its own review were held unsustainable and set aside. The legal point emphasises that the issuing authority's certification of export discharge carries binding administrative effect unless lawfully withdrawn after due adjudication, and Customs lacks jurisdiction to confirm demands contrary to an extant DGFT certificate.

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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.

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