2026 (3) TMI 600 - AT - Customs

Non-fulfilment of EPCG export obligation upheld duty and interest payable; confiscation and penalties set aside.

Non-fulfilment of export obligation under the EPCG scheme without fraud or duty evasion permits recovery of differential customs duty and interest, but ... Liability to pay customs duty and interest for non-fulfilment of EPCG export obligation - benefit of Notification No. 102/2009-Cus dated 11.09.2009 - Confiscation, redemption fine and penalty unsustainable where non-fulfilment due to circumstances beyond importer's control and no fraudulent conduct. Liability to pay customs duty and interest for non-fulfilment of EPCG export obligation - HELD THAT:- The Tribunal found it was admitted that the appellant imported capital goods availing Notification No.102/2009-Cus and did not comply with condition 2(8); accordingly the appellant is liable to pay the differential customs duty and interest. The appellant had deposited the duty which was appropriated by the adjudication order; however applicable interest had not been paid and the revenue is free to recover interest in accordance with law. [Paras 7, 8] The demand of duty with interest is upheld; revenue may proceed to recover the outstanding interest in accordance with law. Confiscation, redemption fine and penalty unsustainable where non-fulfilment due to circumstances beyond importer's control and no fraudulent conduct - HELD THAT:- The Tribunal held there was no allegation of fraud and the non-fulfilment of export obligation resulted from factors beyond the appellant's control (delay in infrastructure provision), and by applying the Tribunal's precedent in the matter of M/s. Rajyalakshmi Labs [2006 (7) TMI 64 - CESTAT, BANG.], the confiscation under section 111(o), redemption fine and penalty under section 112(a) could not be sustained. The Tribunal therefore set aside only the confiscation, redemption fine and penalty while leaving the duty and interest intact. [Paras 7, 8] Confiscation of goods, the redemption fine and the penalty are set aside; other liabilities remain. Final Conclusion: The appeal is partially allowed: the Tribunal confirmed the demand of customs duty and interest for non-fulfilment of the EPCG export obligation and permitted revenue to recover interest, but set aside the confiscation, the redemption fine and the penalty because non-fulfilment was due to circumstances beyond the appellant's control and there was no fraudulent conduct. Issues: (i) Whether the demand of customs duty with interest for non-fulfillment of export obligation under the EPCG scheme is sustainable; (ii) Whether confiscation of imported capital goods, imposition of redemption fine and penalty for non-fulfillment of export obligation are sustainable.Issue (i): Whether the demand of customs duty with interest for non-fulfillment of export obligation under the EPCG scheme is sustainable.Analysis: The Appellant imported capital goods under Notification No. 102/2009-Cus dated 11.09.2009 claiming EPCG benefits and did not comply with condition at Sl.no.2(8) of the said Notification. The Appellant admitted non-fulfillment and paid the differential duty; interest under Section 28AA of the Customs Act, 1962 was claimed by Revenue and remains unpaid. The Tribunal recognises that non-fulfillment arose from factors beyond the Appellant's control and there is no allegation of fraudulent activity.Conclusion: The demand of customs duty with interest is upheld and remains payable; Revenue is entitled to recover interest in accordance with law.Issue (ii): Whether confiscation of imported capital goods, imposition of redemption fine and penalty for non-fulfillment of export obligation are sustainable.Analysis: Prior Tribunal precedents establish that once the differential duty is paid and the importer exits the EPCG scheme, confiscation, redemption fine and penalty are not sustainable in the absence of evasion or fraud. The Appellant established non-fulfillment due to circumstances beyond their control and there is no finding of fraudulent conduct affecting Customs revenue.Conclusion: Confiscation of goods, imposition of redemption fine and penalty are set aside.Final Conclusion: The appeal is partially allowed by confirming the demand of duty with interest while setting aside confiscation, redemption fine and penalty, leaving recovery of interest to proceed as per law.Ratio Decidendi: Where non-fulfilment of export obligation under the EPCG scheme occurs without fraud or duty evasion and the differential duty is paid, confiscation, redemption fine and penalty are not sustainable, although duty and interest remain recoverable.