2019 (8) TMI 77 - AT - Customs

Refund of Interest paid settled amount of 50% of duty forgone - EPCG scheme - failure or delay in fulfilling the condition the export obligation - Extension was granted with a condition that 50% of the duty payable in proportion to the unfulfilled export obligation is paid by the authorization holder to Customs authorities before an endorsement for extension is made on EPCG by RA concerned. - Section 28 of Customs Act, 1962 - HELD THAT - This is not the duty under Section 28 of the Customs Act, 1962 which is paid by the appellant because the final duty is yet to be assessed after verifying the document furnished by the appellant regarding the fulfillment of export obligation. Further, the Customs authorities should have sought clarification from the DGFT authorities but the same has not been done and interest was demanded for not fulfilling the obligation, which is contrary to the Policy. Also, there is no mention in the Policy that this composition fee which is paid as a duty is to be paid along with interest. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Refund claim rejection for interest amount on unfulfilled export obligation under EPCG Scheme.

Analysis:
The appellant's appeal challenged the rejection of their refund claim by the Commissioner of Customs (Appeals) for an interest amount of ?8,43,975 related to unfulfilled export obligations under an EPCG Authorization License. The appellant was granted the license for importing goods at a concessional duty rate but failed to meet the export obligation within the stipulated time. They requested an extension, paying 50% of the duty saved and the interest on it. The appellant later sought a refund of the interest, claiming it was erroneously paid, as per the Policy governing the scheme. The authorities upheld the rejection, citing Section 28 of the Customs Act, 1962 for interest applicability on delayed duty payment.

The appellant argued that the impugned order did not consider the Policy provisions of the Export Promotion Capital Goods Scheme, which allow for extension of the export obligation period with a condition to pay 50% of the duty saved as a composition fee to Customs, without any mention of interest payment. They contended that the interest payment was erroneous and illegal, emphasizing that they had fulfilled the export obligation and even provided evidence of redemption of the EPCG authorization. The appellant also highlighted the failure of authorities to consider the refund of the 50% duty paid for the extension. They pointed out discrepancies in the authorities' findings regarding the export obligation fulfillment and non-adherence to Circular No.46/2004 issued by the CBEC.

Upon review, the Judicial Member found that the appellant had indeed fulfilled the export obligation and obtained a redemption certificate from the DGFT. The EPCG Scheme provision indicated that only 50% of the duty needed to be paid as a composition fee for seeking an extension of the export obligation period, without any mention of interest payment. The Judicial Member noted that the final duty assessment was pending based on verification of fulfillment documents, and Customs should have sought clarification from DGFT before demanding interest. Concluding that the rejection of the refund was not legally sustainable, the Judicial Member set aside the impugned order, allowing the appellant's appeal with any consequential relief.

In summary, the judgment revolved around the incorrect imposition of interest on the duty payment related to unfulfilled export obligations under the EPCG Scheme, emphasizing the Policy provisions, lack of interest mention, fulfillment of obligations, and procedural discrepancies in demanding interest without seeking clarification.