2021 (8) TMI 1066 - AT - Customs

EPCG Scheme - failure to fulfill the conditions stipulated in the license - failure to submit the export obligation discharge certificate EODC issued by the licensing authority - HELD THAT - Once EODC had been issued undisputedly appellants have fulfilled the export obligation arising out of the license issued under Notification No.97/2004 well before the stipulated time (in year 2011 itself). Undisputedly the discharge certificate thereof was duly applied with however could not be issued within 30 days of fulfilling the export obligation accordingly could not be produced within the limit prescribed in the Notification. Delay in issuance of said certificate is also not on account of appellant s fault. Fact still remains is that since the only ground on which the demand was confirmed is non-submission of EODC despite that the same was submitted by the appellant prior the order under challenge was passed showing that he has fulfilled the export obligation within the time. In the present case it is also not in dispute that the petitioner has fulfilled the export obligation substantially and wherever there is little short fall the petitioner has sought regularization and issuance of EODC by offering to pay customs duty proportionately to that extent. The fact that there is delay in regularization and issuance of EODC by the DGFT is very much apparent and also it has not been disputed by the department the customs authorities cannot penalize the petitioner by resorting to coercive action. The appellant has fulfilled the export obligation much prior the expiry of the time under the license issued to him. He also has produced the EODC before Commissioner (Appeals) proving that he has fulfilled the export obligation. The order ignoring the said EOC with an intent to confirm the recovery of duty waiver sought by the appellant at the time of imports is nothing but a forcible recovery. The law has been settled that once EODC is issued the Department cannot recover the amount of duty waiver - the appellant otherwise has duly fulfilled the Export Obligations that too well in time. The delay in issuance of EODC was also not on account of appellant s fault and the same was duly communicated in writing to the Department even to the original adjudicating authority. The certificate as such was produced before Commissioner (Appeals). Appeal allowed.

Summary

Issues Involved:
1. Fulfillment of export obligation under EPCG licenses.
2. Submission of Export Obligation Discharge Certificate (EODC).
3. Legitimacy of the demand for duty, redemption fine, and penalty by the Department.
4. Consideration of EODC by the adjudicating authorities.

Detailed Analysis:

1. Fulfillment of Export Obligation Under EPCG Licenses:
The appellants imported capital goods under EPCG Authorization at a concessional rate of 5% duty, subject to fulfilling export obligations as prescribed in Notification No. 097/2004. The Department observed that the appellants failed to fulfill the conditions stipulated in the license and did not submit the EODC within the specified period. The appellants argued that they fulfilled the export obligation by 2011 but could not submit the EODC immediately due to delays by the Department in issuing the certificate.

2. Submission of Export Obligation Discharge Certificate (EODC):
The appellants contended that they requested additional time to submit the EODC, as the export obligation had been achieved. Despite this, the original adjudicating authority confirmed the demand for duty, redemption fine, and penalty for non-submission of the EODC. The EODC was eventually issued on March 30, 2017, after the Order-in-Original but before the Order-in-Appeal. The Commissioner (Appeals) ignored the EODC and mechanically rejected the appeal.

3. Legitimacy of the Demand for Duty, Redemption Fine, and Penalty by the Department:
The Department argued that the appellants were required to fulfill the export obligation within 8 years from the date of issue of the license and submit the EODC within 30 days of fulfilling the obligation. The appellants failed to appear before the original adjudicating authority and did not respond to the DGFT Quotationary letter dated November 5, 2015. The Department maintained that the demand was rightly confirmed due to the non-submission of the EODC within the stipulated time.

4. Consideration of EODC by the Adjudicating Authorities:
The Tribunal observed that the appellants fulfilled the export obligation by 2011 and applied for the EODC, which was delayed due to no fault of their own. The EODC was submitted before the Commissioner (Appeals), but it was ignored, leading to the confirmation of the demand. The Tribunal cited precedents where the courts held that the Department cannot penalize the appellants if the delay in issuing the EODC is not their fault. The Tribunal found the order of the Commissioner (Appeals) to be highly unjustified and contrary to the decisions of superior courts.

Conclusion:
The Tribunal concluded that the appellants fulfilled the export obligation within the stipulated time, and the delay in issuing the EODC was not their fault. The demand for duty, redemption fine, and penalty was deemed improper and contrary to established legal precedents. The Tribunal set aside the order under challenge and allowed the appeals. The Commissioner (Appeals) was summoned to explain the ignorance of the EODC while confirming the demand. The appeals were ordered to be allowed, and the order was pronounced in the open court on August 25, 2021.