Export obligation discharge and bond release defeat customs demand, with penalty, confiscation, and extended limitation also failing.

Export obligation discharged through an unrevoked EODC and release of the customs bond defeats a later demand for alleged breach of exemption conditions, because the basis for recovery ceases once the licensing authority has verified compliance. The commentary also notes that contemporaneous excise proceedings treating the goods as received by the buyer unit, reliance on witness statements without cross-examination, and an inconclusive partial vehicle enquiry could not support a demand across all consignments. In the absence of fraud, suppression, or intent to evade duty, the extended limitation period was not available, and the related penal recommendation, confiscation, and redemption fine likewise could not be sustained.

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Issues: (i) Whether duty could be demanded for alleged non-fulfilment of export obligation after the Export Obligation Discharge Certificates had been issued by DGFT and the bonds stood discharged; (ii) whether the demand could survive when contemporaneous proceedings of the Central Excise Department proceeded on the footing that the goods had been received by the buyer unit; (iii) whether denial of cross-examination of witnesses whose statements were relied upon vitiated the order, and whether extrapolation from a partial vehicle enquiry could sustain demand on all consignments; (iv) whether the extended period under Section 28(4) of the Customs Act, 1962 was invokable; (v) whether the recommendation under Section 135 of the Customs Act, 1962 could survive; and (vi) whether confiscation and redemption fine were legally sustainable.

Issue (i): Whether duty could be demanded for alleged non-fulfilment of export obligation after the Export Obligation Discharge Certificates had been issued by DGFT and the bonds stood discharged?

Analysis: The discharge certificates issued by DGFT after verification were treated as conclusive of fulfilment of export obligation. Once the licensing authority had verified compliance and the customs bonds had been released, the foundation for invoking the demand on breach of exemption conditions ceased to exist. The Tribunal relied on its earlier view that, after issuance of EODC and release of bond, confirmation of customs duty for alleged violation of the notification conditions is unsustainable.

Conclusion: The demand was not sustainable and this issue was answered in favour of the assessee.

Issue (ii): Whether the demand could survive when contemporaneous proceedings of the Central Excise Department proceeded on the footing that the goods had been received by the buyer unit?

Analysis: The contemporaneous show cause notices issued by the Central Excise Department to the recipient unit proceeded on the premise that the impugned raw materials had been received from the assessee. That departmental position contradicted the theory in the customs proceedings that no movement of goods had taken place. On that record, the allegation of diversion into the domestic market could not be sustained.

Conclusion: The demand was unsustainable on this ground and this issue was answered in favour of the assessee.

Issue (iii): Whether denial of cross-examination of witnesses whose statements were relied upon vitiated the order, and whether extrapolation from a partial vehicle enquiry could sustain demand on all consignments?

Analysis: The order was founded on statements of witnesses without allowing cross-examination despite specific request. Reliance on such statements without testing them through examination and cross-examination was held to offend natural justice. The Tribunal also found that the vehicle inquiry covered only a limited portion of consignments and was inconclusive in a substantial part of that subset, so demand on the entire volume of imports could not be upheld by extrapolation.

Conclusion: The impugned order could not be sustained on these grounds and this issue was answered in favour of the assessee.

Issue (iv): Whether the extended period under Section 28(4) of the Customs Act, 1962 was invokable?

Analysis: The Tribunal found no positive act of fraud, collusion, wilful misstatement, or suppression with intent to evade duty. The issuance of EODCs and discharge of bonds were within the knowledge of the Department, and therefore the extended limitation provision could not be invoked on the facts of the case.

Conclusion: The extended period was not invokable and this issue was answered in favour of the assessee.

Issue (v): Whether the recommendation under Section 135 of the Customs Act, 1962 could survive?

Analysis: Once the demand itself failed and the factual foundation of alleged diversion was not established, the penal recommendation under Section 135 could not stand. The Tribunal held that the ingredients necessary for sustaining the penal consequence were absent in the circumstances found.

Conclusion: The recommendation under Section 135 could not survive and this issue was answered in favour of the assessee.

Issue (vi): Whether confiscation and redemption fine were legally sustainable?

Analysis: As the Tribunal accepted that the goods had been duly accounted for through the export obligation mechanism and the core demand failed, the goods could not be treated as liable to confiscation. In the absence of a sustainable confiscation, redemption fine also could not be imposed.

Conclusion: Confiscation and redemption fine were not sustainable and this issue was answered in favour of the assessee.

Final Conclusion: The Tribunal set aside the customs demand, penalty-related consequences, confiscation, and redemption fine, and granted relief to the assessee and the co-noticees while rejecting the Revenue's challenge.

Ratio Decidendi: Where export obligation has been conclusively discharged and the customs bond has been released on the basis of an unrevoked EODC issued by the licensing authority, the customs demand for alleged breach of exemption conditions cannot survive, and consequential penalty, confiscation, and redemption fine also fail.

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