Export Obligation Discharge Certificate determinative for EPCG obligations; customs demand and penalties set aside where DGFT did not cancel EODC

Export Obligation Discharge Certificates issued by DGFT are determinative of fulfillment under the EPCG scheme; Customs authorities cannot sustain demands, confiscation or redemption fines in respect of EPCG obligations without a prior cancellation or adjudication by DGFT, and therefore the confirmed demand and penalties were set aside. The ruling also recognises export earnings from hotel, travel and tourism services as creditable for discharge of EPCG export obligations, with the consequence that such export receipts may satisfy the scheme requirement when certified by DGFT.

---

---

Issues: Whether, in the presence of an Export Obligation Discharge Certificate (EODC) issued by the DGFT evidencing fulfillment of export obligation in respect of goods imported under the EPCG scheme, the Customs authorities can confirm demand, confiscate the goods and impose redemption fine without prior adjudication or cancellation of the EODC by DGFT.

Analysis: The Tribunal examined whether the EODC issued by the competent licensing authority conclusively evidenced discharge of export obligation and whether Customs had jurisdiction to re-open or disregard that certificate in the absence of any cancellation or adjudication by DGFT. The analysis considered DGFT clarifications regarding use of imported vehicles and inclusion of related foreign exchange earnings towards discharge of export obligation, and subsequent Tribunal and High Court/Supreme Court authorities addressing relative jurisdictions of DGFT and Customs. The conclusion in the cited authorities that where EODC remains valid and uncancelled, Customs cannot sit in judgment over the certificate and cannot confirm demand or impose penalties without DGFT action was applied to the facts at hand.

Conclusion: The demand, confiscation and imposition of redemption fine by Customs are not sustainable in the absence of any adjudication or cancellation of the EODC by DGFT; decision set aside and appeal allowed in favour of the assessee.

---