2021 (10) TMI 944 - HC - Customs

Export Promotion Capital Goods Scheme (EPCG Scheme) - import of capital equipments either at nil or concessional rate of customs duty - authority calls upon the petitioner to produce various export documents to establish the discharge of export obligation under the scheme, within a stipulated time - violation of the terms of the Scheme disentitling the petitioner to the benefit claimed - HELD THAT - In the present case, since the exports were under free shipping bills, it appears that authorities have not had no opportunity or avenue to undertake any examination in the matter. However, and fortunately for the petitioner, the matter is still at large, since the show cause notices issued by R2 in respect of the exports undertaken under two licenses, are still pending. The dispute in this matter can thus be resolved by directing the ADGFT to continue the proceedings under show cause notices dated 26.03.2019, hear the petitioner and pass orders on the entitlement to the benefits under the EPCG Scheme. The exercise shall be completed within two weeks from today and shall cover the entitlements of the petitioner in respect of all eight licenses. Let suitable orders be passed in this regard after the petitioner is heard. Till such time the impugned order dated 26.07.2019 passed by the PRC be kept in abeyance and subject to the result of the enquiry to be undertaken as ordered aforesaid. Petition disposed off.

Summary

Issues:
1. Interpretation of Export Promotion Capital Goods Scheme (EPCG Scheme) under the Foreign Trade Policy.
2. Compliance with export obligations and rectification of deficiencies.
3. Validity of deficiency and show cause notices issued to the petitioner.
4. Invocation of bank guarantee by Customs authorities.
5. Consideration of procedural lapses in claiming benefits under the EPCG Scheme.
6. Authority responsible for determining entitlement under the EPCG Scheme.

Analysis:

1. The judgment dealt with the petitioner, a manufacturer-exporter engaged in the production and export of rough granite blocks, who had obtained licenses under the EPCG Scheme for importing capital equipment at concessional rates. The petitioner claimed to have fulfilled export obligations as required by the Foreign Trade Policy.

2. Deficiencies were noted by the Director General of Foreign Trade, leading to deficiency and show cause notices to rectify defects under the EPCG Scheme. The petitioner's compliance with these notices was disputed, resulting in the possibility of withdrawal of benefits granted under the Scheme.

3. The issuance of deficiency notices for all shipping bills seeking EPCG benefits, followed by show cause notices proposing benefit withdrawal, raised concerns regarding procedural adherence and fulfillment of export obligations.

4. The Customs authorities invoked the bank guarantee furnished by the petitioner due to alleged non-compliance with export obligation requirements, leading to a legal challenge by the petitioner seeking a relaxation of policy terms.

5. The petitioner argued that the non-mention of EPCG license numbers in shipping bills was a procedural lapse and should not affect benefit entitlement. However, the DGFT contended that such omissions could signify substantial non-fulfillment of policy conditions.

6. The judgment emphasized the role of the DGFT in determining entitlement under the EPCG Scheme, highlighting the need for thorough verification of documents and evidence to support claims of compliance with export obligations. The court directed the DGFT to continue proceedings under show cause notices to resolve the dispute and determine the petitioner's entitlement to benefits under the Scheme.