1993 (9) TMI 119 - HC - Customs

Issues Involved:
1. Compliance with EPCG Scheme conditions.
2. Interpretation of bank guarantee requirements.
3. Applicability of Notification No. 160 of 1992.
4. Time limit for executing bank guarantee and legal undertaking.
5. Potential prejudice to revenue.

Issue-wise Detailed Analysis:

1. Compliance with EPCG Scheme conditions:
The petitioners, owners of a Textile Mill, applied for a licence under the EPCG Scheme to import capital goods at a concessional duty rate of 15% instead of 50%. The licence was issued on 17-1-1992, covering specific machinery. The petitioners faced issues with the bank guarantee and legal undertaking requirements, as outlined in the respondents' letter dated 13-5-1993. The respondents argued that the petitioners had not fulfilled the conditions of the EPCG Scheme, specifically the execution of a bond and bank guarantee within six months from the date of the licence.

2. Interpretation of bank guarantee requirements:
The petitioners contended that the bank guarantee requirement should be based on the actual duty saved on the imported goods rather than the Face Value of the licence. They argued that the duty incidence is only on the goods actually imported, and thus, the bank guarantee should correspond to the duty saved on those goods alone. The court agreed with this interpretation, emphasizing that the scheme's objective is to incentivize exports and not to impose undue burdens on importers.

3. Applicability of Notification No. 160 of 1992:
The respondents cited several judgments to argue that the petitioners had not complied with the conditions for concessional duty under the notification. However, the court distinguished these cases, noting that the petitioners had, in fact, complied with the relevant conditions. The court emphasized that once the notification applies, it should be interpreted liberally in favor of the petitioners, aligning with the scheme's objective to promote exports.

4. Time limit for executing bank guarantee and legal undertaking:
The petitioners missed the six-month deadline for executing the bank guarantee and legal undertaking, as stipulated in Clause 102 of the Handbook of Procedures. The court acknowledged this delay but noted that the entire scheme is based on a time schedule, with an overall export obligation period of five years. The court permitted the clearance of the goods, subject to the petitioners applying for a modification of the licence conditions regarding the six-month period.

5. Potential prejudice to revenue:
The court considered whether the respondents would suffer any prejudice if the goods were cleared based on the petitioners' interpretation. It concluded that there would be no prejudice, as the petitioners were willing to satisfy all conditions for the imported goods. The court noted that the respondents had the power to assess the correct value of the imported goods and demand the appropriate bank guarantee, ensuring no loss to revenue.

Conclusion:
The court allowed the writ petition, permitting the clearance of the goods on the execution of a bank guarantee for 50% of the duty saved on the imported items alone. The petitioners were also required to execute a legal undertaking for the entire Face Value of the licence and seek an amendment of the licence conditions regarding the six-month period for furnishing the bank guarantee. The court emphasized the need for a liberal interpretation of the EPCG Scheme to promote exports, aligning with the scheme's objective. No order as to costs was made.

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