CESTAT Mumbai Sets Aside Customs Duty Demand Under EPCG Scheme; Delay in EODC Issuance by DGFT Held Beyond Exporter’s Control

Aadrikaa Legal Services (ALS)- Law I Litigation I Arbitration

Date: 10.09.2026

CESTAT Mumbai Sets Aside Customs Duty Demand Under EPCG Scheme; Delay in EODC Issuance by DGFT Held Beyond Exporter’s Control

The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Mumbai has granted significant relief to CEAT Limited in an EPCG dispute, setting aside a customs duty demand of ₹1.79 crore, along with redemption fine and penalty, after finding that the company had fulfilled its export obligations and that the delay in issuance of the Export Obligation Discharge Certificate (EODC) by DGFT was beyond its control.

The Regional Bench comprising Judicial Member Ajay Sharma and Technical Member M.M. Parthiban allowed CEAT’s appeal against the Order-in-Original dated 22 May 2025 passed by the Commissioner of Customs (Export), Mumbai.

Background of the EPCG Dispute

• CEAT, engaged in the manufacture of automobile tyres, had obtained six EPCG authorisations in 2013 for importing capital goods against the export of tyres. The capital goods imported under these authorisations were valued at approximately ₹7.76 crore, involving customs duty foregone of ₹1,79,12,579. CEAT had executed bonds undertaking fulfilment of its export obligations.
• Customs subsequently alleged that CEAT had failed to produce the required Capital Goods Installation Certificates and had also not submitted the EODC as required under the applicable EPCG exemption notification.
• Accordingly, a show cause notice dated 7 October 2024 proposed recovery of the entire duty foregone amount of ₹1.79 crore with interest, confiscation of the imported capital goods under Section 111(o) of the Customs Act, 1962, and penalty under Section 112(a). The Commissioner confirmed the proposals through the Order-in-Original dated 22 May 2025.

CEAT Had Already Applied to DGFT for EODC

• Before CESTAT, CEAT contended that it had fulfilled the prescribed export obligation and had already approached the DGFT authorities for issuance of the EODC.
• Significantly, the application seeking the discharge certificate had been submitted to DGFT on 13 January 2020, well before the Customs adjudication. The EODC, however, remained pending with the licensing authority when the Commissioner passed the impugned order.
• CEAT also produced installation certificates issued by the jurisdictional Central Excise authorities covering the imported capital goods. Subsequently, the EODC covering all six EPCG authorisations was issued by DGFT, and Customs itself accepted the discharge certificate and cancelled the bonds executed under the six EPCG authorisations.

Delay by DGFT Was Beyond Exporter’s Control: CESTAT

• The Tribunal found that the requisite conditions concerning installation of the imported capital goods had been fulfilled.
• More importantly, CESTAT noted that CEAT had submitted the necessary details to DGFT for obtaining the EODC as early as 13 January 2020, whereas the certificate was ultimately issued only later by the DGFT authorities.
• The Tribunal therefore held that non-production of the EODC during adjudication was beyond CEAT’s control, since the competent authority had not issued the certificate despite CEAT having completed the exports necessary for fulfilment of its export obligation and submitted the requisite documents.
• This finding is particularly important for EPCG disputes where an importer/exporter has completed the substantive export obligation but faces Customs proceedings merely because the formal discharge certificate remains pending before DGFT.

Customs Should Not Prematurely Decide EPCG Compliance While EODC Is Pending

• CESTAT relied upon its earlier decision in Alca Technologies v. Commissioner of Customs, Nhava Sheva-IV, reported at 2019 (369) E.L.T. 1447 (Tri.-Mumbai).
• In that case, the Tribunal had held that where an application for EODC remained pending before the licensing authority, the proper course for Customs was to keep the show cause notice pending until the licensing authority took a decision, rather than independently proceeding to conclude that the conditions of the exemption notification had not been fulfilled.
• The principle assumes importance because determination of whether the export obligation under an EPCG authorisation has been discharged substantially falls within the framework administered by DGFT.

CESTAT Notes Contradictory Stand Taken by Customs

• One of the strongest observations in the order concerned the contradictory positions adopted within the Customs Department itself.
• After DGFT issued the EODC, the Customs authorities accepted the certificate and cancelled the bonds relating to all six EPCG licences. At the same time, the impugned adjudication order continued to demand customs duty on the premise that CEAT had failed to submit the EODC.
• CESTAT observed that, on one hand, Customs had confirmed the duty demand for non-production of the EODC, while on the other hand, authorities of the same Commissionerate had subsequently accepted the EODC and cancelled the bonds.
• The Tribunal therefore found no merit in sustaining the demand merely on the ground of non-submission of the documents during the original adjudication.

Duty Demand, Redemption Fine and Penalty Set Aside

• In light of CEAT’s fulfilment of the EPCG conditions, issuance of the EODC by DGFT, production of installation certificates and subsequent cancellation of the bonds by Customs itself, CESTAT held that the impugned order could not legally survive.
• The Tribunal accordingly held that the order, insofar as it confirmed the customs duty demand along with redemption fine and penalty, was legally unsustainable.
• The impugned order was therefore set aside and CEAT’s appeal was allowed.

Key Legal Takeaway

The ruling reinforces an important principle in EPCG and export-promotion disputes: where an exporter has completed the substantive export obligation and has timely approached DGFT for an EODC, it should not ordinarily suffer adverse customs consequences merely because issuance of the formal certificate remains pending with the licensing authority.

The decision also underlines the need for coordination between DGFT and Customs. Where the licensing authority is still considering an EODC application, Customs should avoid prematurely concluding that the export obligation has not been fulfilled.

Once DGFT subsequently certifies fulfilment and Customs itself accepts that certificate by cancelling the corresponding bonds, maintaining a duty demand based solely on earlier non-production of the EODC becomes untenable.

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Source: CESTAT Mumbai

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Ravi Shekhar Jha – Advocate, Bar Council of Delhi