Customs Cannot Override DGFT’s EODC: CESTAT Sets Aside Duty and Penalty on Vedanta Ltd [Read Order]

The Chennai bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has set aside the duty and penalties imposed on Vedanta Ltd, holding that the customs authorities cannot override the Directorate General of Foreign Trade’s (DGFT) Export Obligation Discharge Certificate (EODC) once the same is issued.

Vedanta Ltd imported copper concentrates under three Advance Authorisations issued between 2009 and 2010. These authorisations allowed duty-free imports subject to the fulfilment of export obligations (EO) in terms of both quantity and value.

While the company fulfilled the quantity obligations under two authorisations, there was a shortfall in value. For the 2009 authorisation, a shortfall existed in both value and quantity, which Vedanta later regularised by paying the customs duty and interest.

To address the shortfall in value obligations, Vedanta approached the DGFT, paid 1% of the shortfall as required under Para 4.28 of the Foreign Trade Policy (FTP 2009–14) and Para 4.49 of FTP (2015–20), and obtained EODCs in 2017. These certificates redeemed the authorizations, confirming that the export obligations stood fulfilled.

Despite this, the Directorate of Revenue Intelligence (DRI) issued a show cause notice in 2019 alleging violation of conditions under Customs Notification Nos. 96/2009-Cus and 99/2009-Cus. The Commissioner of Customs, Tuticorin, upheld the demand in 2020, confirming duty, interest, and penalties under Section 112(a) of the Customs Act, 1962.

The Tribunal, comprising P. Dinesha (Judicial Member) and Vasa Seshagiri Rao(Technical Member), framed the central issue as whether customs authorities could raise a demand alleging violation of notification conditions when the DGFT had already issued EODCs.

It was observed that the DGFT alone is competent to determine fulfilment of export obligations under the FTP. Customs cannot adopt a different interpretation once DGFT certifies compliance. It was noted that the issuance of EODC by DGFT conclusively establishes fulfilment of EO. CBIC’s own Circular No. 16/2017-Cus clarified that recovery proceedings arise only if EODCs are not submitted.

The Tribunal placed its dependence on Supreme Court rulings in Titan Medical Systems Pvt. Ltd. and High Court decisions in Autolite (India) Ltd., Greatship (India) Ltd., and others, which consistently held that customs authorities cannot go behind DGFT’s certification.

The Commissioner’s reliance on Sheshank Sea Foods Pvt. Ltd. was found inapplicable, as that case dealt with customs’ power to investigate, not with EO certification.

The Tribunal categorically held that customs authorities cannot override DGFT’s certification of export obligation fulfilment. It set aside the duty demand, interest, and penalties imposed on Vedanta Ltd., allowing the appeal with consequential benefits.

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