2026-VIL-921-CESTAT-CHE-CU
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CUSTOMS CESTAT Cases

Customs law - EPCG Scheme – Validity of confiscation of imported capital goods and imposition of penalty for non-fulfilment of export obligation - Whether confiscation of imported capital goods and imposition of penalty are sustainable when the entire differential duty along with applicable interest stands paid by the importer for failure to fulfil the export obligation within the stipulated period under the EPCG Scheme – HELD - Upon payment of duty and interest, the importer exits the EPCG scheme and the goods cannot be held liable to confiscation under Section 111(o) of the Customs Act, 1962. Non-fulfilment of export obligation, in the absence of diversion or misuse, does not automatically warrant penal consequences. Considering the inherent uncertainties of business including adverse market conditions and economic downturn, failure to fulfil export obligation cannot be equated with deliberate violation. Failure in business in not uncommon and cannot be stigmatised – As per the principle established in Hindustan Steel Ltd v State of Orissa, penalty is a quasi-criminal proceeding and ordinarily cannot be imposed unless the party either acted deliberately in defiance of law or was guilty of conduct that is contumacious or dishonest, or acted in conscious disregard of its obligation - A Department which prides itself on being a trade facilitator, resorting to harsh measures like confiscation and penalty without any allegation of wilful evasion and for merely not fulfilling export obligation is unwarranted. The confiscation of goods, fine and penalty is set aside and the appeal is allowed
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