2025 (3) TMI 748 - HC - Customs

Amnesty scheme - Failure to achieve the export obligation - availment of concessional rate of duty utilising the benefit of the Export Promotion Capital Goods Scheme - HELD THAT - It is clear from Ext.P1 that the sum of Rs. 50, 23, 802/- represents the entire amount of duty forgone under the EPCG Scheme. Rs. 13, 35, 689/- represents the interest payable on the said amount. The learned Standing Counsel appearing for the Customs Department does not dispute this. If that be the case the failure to achieve the export obligation has been regularised in terms of the scheme. The inability to fulfill export obligation in terms of the Scheme no doubt exposed the petitioner to proceedings for recovery of the Customs Duty and for confiscation/imposition of penalty. However once a Scheme for settling the liability had been introduced and the petitioner had paid Customs Duty forgone together with interest thereon and had obtained an export obligation discharge certificate (which is to be issued in terms of Ext.P2) the default in not achieving the export obligation was regularized by the proper authority namely the Directorate General of Foreign Trade Department of Commerce. There is yet another way of understanding the issue. The only benefit obtained by the petitioner by utilising the benefit of the EPCG Scheme was that he could import goods without paying the full amount of customs duty. In terms of the Amnesty Scheme the petitioner has to pay the entire amount of duty foregone along with interest up to the date of payment. On payment of the total amount of duty along with interest it must be deemed that the petitioner has not availed the benefit of the EPCG Scheme. If that were the situation the liability to achieve export obligation would be discharged and no penalty/fine could be imposed on the petitioner. The fine imposed under Section 112 (a) of the Act in lieu of confiscation under Section 111 (o) of the Act cannot be recovered from the petitioner. Conclusion - i) The petitioner having regularized the export obligation by paying the duty and interest under the Amnesty Scheme cannot be subjected to penalties for the same default. ii) The imposition of a penalty under Section 112(a) of the Customs Act is not justified once the export obligation is deemed fulfilled through the Amnesty Scheme. Petition allowed.

The core legal issue presented in this case revolves around the interpretation and application of the Amnesty Scheme for a one-time settlement of defaults in achieving export obligations under the Export Promotion Capital Goods Scheme (EPCG Scheme). The petitioner failed to meet the export obligation required under the EPCG Scheme, leading to proceedings for recovery of duty forgone, confiscation of goods, and imposition of a penalty. The petitioner contends that the Amnesty Scheme should discharge all liabilities, including penalties, upon payment of the duty and interest. The Customs Department argues that the Amnesty Scheme does not waive penalties.

Issue-Wise Detailed Analysis

1. Legal Framework and Precedents

The EPCG Scheme allows importers to import capital goods at a concessional duty rate, subject to fulfilling certain export obligations. Failure to meet these obligations results in recovery of the duty forgone and potential penalties under the Customs Act, 1962. The Amnesty Scheme, introduced by the Government, allows defaulters to regularize their cases by paying the duty forgone along with interest, but its scope regarding penalties is contested.

2. Court's Interpretation and Reasoning

The Court examined the language of the Amnesty Scheme, noting that it allows for the regularization of defaults in export obligations by paying the duty and interest. The Court emphasized that the scheme's purpose is to settle such defaults, and once the petitioner paid the duty and interest, the export obligation was considered regularized. The Court interpreted that the payment under the Amnesty Scheme essentially nullifies the benefit initially availed under the EPCG Scheme, thereby discharging the petitioner from the export obligation.

3. Key Evidence and Findings

The petitioner paid the entire amount of duty forgone (Rs. 50,23,802/-) and the applicable interest (Rs. 13,35,689/-) as per the Amnesty Scheme. The Customs Department did not dispute these payments. The petitioner also obtained an Export Obligation Discharge Certificate, indicating compliance with the Amnesty Scheme.

4. Application of Law to Facts

The Court applied the provisions of the Amnesty Scheme to the facts, concluding that the petitioner's payment of duty and interest regularized the default in export obligation. The Court reasoned that since the petitioner effectively nullified the benefit of the EPCG Scheme by paying the duty and interest, the conditions for imposing penalties under Section 112(a) of the Customs Act were not met.

5. Treatment of Competing Arguments

The Customs Department argued that the Amnesty Scheme does not explicitly waive penalties and that the petitioner should still be liable for the penalty imposed under the adjudication order. The Court rejected this argument, finding that the regularization of the export obligation under the Amnesty Scheme implicitly discharged the petitioner from further penalties. The Court highlighted that the absence of a specific waiver of penalties in the scheme does not preclude the discharge of liabilities once the duty and interest are paid.

6. Conclusions

The Court concluded that the petitioner, having regularized the export obligation by paying the duty and interest under the Amnesty Scheme, cannot be subjected to penalties for the same default. The Court held that the imposition of a penalty under Section 112(a) of the Customs Act was not justified once the export obligation was deemed fulfilled through the Amnesty Scheme.

Significant Holdings

The Court established the principle that the payment of duty and interest under the Amnesty Scheme effectively nullifies the benefits availed under the EPCG Scheme, thereby discharging the petitioner from the export obligation and associated penalties. The Court's reasoning underscores that the Amnesty Scheme's intent is to provide a comprehensive settlement of defaults, including implicit waiver of penalties once the duty and interest are paid.

The Court's final determination allowed the writ petition in terms of prayer No.(b), effectively quashing the demands for penalty payment and preventing further recovery actions based on the adjudication order.

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