2020 (11) TMI 691 - HC - Customs

EPCG Scheme - non-issuance of Occupation Certificate - Construction of a multistoried building for operating a hotel - the cost included the cost of imported goods against which customs duty was not paid, as the goods imported were against 50 EPCG licenses - HELD THAT - Since an application is pending, I am not going into the merits of the case. The EPCG committee is requested to consider the application filed by the petitioner on 9th August, 2020 within four weeks from today. The committee is also requested to pass a reasoned order after giving opportunity of hearing, not only to the petitioner but also to the customs authority, if required. As the petitioner has already alienated with the goods, imported without payment of customs duty, the customs authority may proceed to encash the bank guarantee for realising the customs duty but such realised amount shall be kept in a separate account and not to be appropriated as government dues till a reasoned order is passed by the EPCG committee. If the reasoned order is in favour of the petitioner, the customs department shall refund the amount to the petitioner at an earliest. Petition disposed off.

Summary

Issues:
1. Non-fulfillment of export obligation against imported goods.
2. Encashment of bank guarantee by customs authorities.
3. Jurisdiction of EPCG Committee to amend trade policy.

Analysis:
1. The petitioners completed construction of a hotel in 2011 with an investment of ?200 Crores, including goods imported against 50 EPCG licenses. The hotel was ready for operation in 2012, but due to objections, the occupation certificate was issued in 2018 by the Supreme Court's order. The project failed, and the property was sold under SARFAESI Act. Customs initiated recovery proceedings in 2019 for non-fulfillment of export obligation, directing the bank guarantee's encashment in 2020. The petitioners applied for relaxation of import conditions in August 2020, pending before the EPCG Committee.

2. The petitioners sought a stay on the bank guarantee encashment, citing legal precedents and public notices. The Union of India argued that the petitioners were aware of the export obligation failure since 2017 but applied to the EPCG Committee in 2020, knowing the committee's limitations. Customs authorities stated that the property linked to the import and export obligation was already alienated, indicating no intention to fulfill obligations. Despite a notice in 2019, the petitioners delayed action until the bank guarantee encashment process began.

3. The Court refrained from delving into the case's merits due to the pending application. It directed the EPCG Committee to review the petitioners' August 2020 application within four weeks, providing a reasoned order after hearing all parties. While allowing customs to encash the bank guarantee, the realized amount must be held separately until the EPCG Committee's decision. If in favor of the petitioners, the customs department should promptly refund the amount. The writ petition was disposed of without costs, and no affidavits were invited, assuming the respondents denied the allegations.

This judgment emphasizes the importance of fulfilling export obligations, the authority of the EPCG Committee in trade policy matters, and the procedural fairness in handling customs duties and bank guarantees.