2026 (2) TMI 47 - AT - Customs

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 ... Determinative effect of Export Obligation Discharge Certificate (EODC) on fulfilment of export obligation - jurisdiction of Customs authorities to question certificates issued by DGFT - validity of demand, confiscation and redemption fine where DGFT has issued EODC - recognition of export earnings from hotel, travel and tourism services for EPCG obligations - Export Promotion Capital Goods (EPCG) Scheme - HELD THAT:- In view of the aforesaid 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 appellant, cannot, therefore, be sustained and is set aside. 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.