EPCG Obligation Default: Madras HC Directs Adjudication Before Refunding Encashed Bank Guarantee

The Madras High Court disposed of Writ Petition filed, directing the Assistant Commissioner of Customs to conclude the adjudication proceedings pursuant to a Show Cause Notice (SCN) dated 28.02.2023 and pass appropriate orders on merits. The Court clarified that if the petitioner succeeds in the adjudication, the bank guarantee previously encashed by the respondents would be refunded.

The petitioner, Bellco Industries, engaged in the manufacture of pet chips and trading of aluminium scrap, had imported capital goods, including a bottle crushing machine and accessories, under the Export Promotion Capital Goods (EPCG) Scheme, intended for export production.

The Assistant Commissioner issued a SCN denying customs duty exemption, seeking recovery of interest, and proposing penalty under Section 117 of the Customs Act for non-fulfilment of export obligations.

Prior to adjudication, the respondents encashed Bank Guarantee No.152BG090152, dated 15.04.2008, on the ground that the petitioner had not produced the Export Obligation Discharge Certificate.

The petitioner contended that the encashment of the bank guarantee was premature and that the outcome of the adjudication should determine whether the guarantee could be refunded.

The bench comprising Justice M. Dhandapani emphasized that the adjudication must be completed forthwith and that the petitioner’s right to restitution of the encashed guarantee will depend on the final order passed in the adjudication order.

Accordingly, the writ petition was disposed of in the above terms, with no costs, and connected miscellaneous petitions were closed.

The Petitioner was represented by A.K. Jayaraj, while B.Aravind Srivatsav along with K.Ramana Moorthy appeared for the Revenue.

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