2026-VIL-1462-CESTAT-AHM-CU
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CUSTOMS CESTAT Cases

Customs - Duty demand on non-fulfilment of export obligation - EPCG Import - Force majeure circumstances - Appellants imported embroidery machinery under valid EPCG Licenses and saved customs duty upon furnishing required bonds and bank guarantees. Due to unprecedented floods in the jurisdiction, the imported machinery got submerged in water and damaged beyond repair notwithstanding which the appellants subsequently shifted the machinery to safe premises - The Customs authorities demanded recovery of the duty saved along with interest and also confiscated the imported machinery, imposed redemption fine and penalty. The appellants contended that they could not fulfil the export obligations due to force majeure circumstances and that the machinery became incapable of production due to damage, relying on Notification No.97/2004-Cus. read with para 4 as amended vide Notification No.72/2007-Cus. - Whether the confiscation of imported machinery and imposition of penalty and redemption fine can be maintained where export obligation is not fulfilled due to force majeure circumstances beyond the control of the importer - HELD - As per Condition of the notification, if the importer fails to fulfil export obligation within the stipulated time, then he is required to pay the customs duty. However, as per condition 7 of para 2, the importer could request DGFT authorities for grating extension of time for completing the export obligation. The appellant could not produce any waiver of export obligation either from the committee or from DGFT authorities - The conditions of Notification No.97/2004-Cus. are explicit that duty concession was granted subject to fulfilment of export obligation and failure to fulfil specified obligation would require payment of duty saved along with interest - Exemption notifications require strict interpretation and the burden lies on the assessee to demonstrate that the case falls within the parameters of the exemption. However confiscation of goods under Section 111(o) of the Customs Act cannot be justified when there are reasons beyond the control of the importer for non-fulfilment of obligation. Similarly penalty under Section 112(a) cannot be imposed without mens rea and where the importer had made sincere efforts but circumstances were beyond control, mens rea is absent - The duty demand and interest liability are upheld but the confiscation of imported machinery, redemption fine and penalty are set aside as unjustified - The impugned orders are modified and the appeals are partially allowed
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