Customs Can’t Override Valid DGFT EODC: CESTAT

The Kolkata Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that once Export Obligation Discharge Certificates (EODCs) are issued by the Directorate General of Foreign Trade (DGFT) and remain unrevoked, customs authorities cannot independently reopen or challenge fulfillment of export obligations. The bench of Ashok Jindal (Judicial Member) and K. Anpazhakan ( Technical Member), allowed the appeals filed by Kalpena Plastiks and its directors while dismissing the departments appeal seeking imposition of redemption fine. The dispute arose from imports made during the period 2009–2012 under the Advance Authorisation (AA) and Duty-Free Import Authorisation (DFIA) schemes. The company had obtained 29 authorisations from DGFT and imported polymer and plastic raw materials involving a total CIF value of more than ₹67.51 crore with duty foregone amounting to approximately ₹14.97 crore. The imports were undertaken with export obligations to be discharged through deemed exports to a 100% Export Oriented Unit (EOU), THPL. According to the Directorate of Revenue Intelligence (DRI), the company had allegedly misused the AA and DFIA schemes by diverting duty-free imported goods into the domestic market instead of supplying them for export obligations. Based on this allegation, the DRI issued a show cause notice proposing confiscation of goods, recovery of customs duty with interest and penalties. The assessee strongly contested the allegations and argued that DGFT had already verified compliance and issued EODCs for all 29 authorisations. The company further pointed out that customs authorities themselves had redeemed the bonds executed at the time of import and released any associated bank guarantees. No proceedings had ever been initiated by DGFT to revoke or cancel any of these EODCs. The Tribunal accepted this contention and observed that EODCs are determinative of fulfillment of export obligations. It held that once DGFT issues EODCs and customs authorities themselves discharge the corresponding bonds, the basis for demanding customs duty collapses. The Tribunal relied upon earlier precedents including Skipper Ltd., Vedanta Ltd., and Interglobe Enterprises Ltd. to reaffirm this principle. The Bench also found serious inconsistencies within the department's own records. While DRI alleged that no goods had moved to THPL and that the materials had instead been diverted into the domestic market, separate show cause notices issued by the Central Excise Department to THPL specifically proceeded on the basis that THPL had actually received the goods and used them in manufacturing activity. The Tribunal noted that two arms of the same department cannot simultaneously take contradictory positions regarding the same set of transactions. It remarked that if one authority accepts receipt of goods while another alleges complete non-movement of the same goods, both positions cannot coexist legally. Another significant aspect examined by the Tribunal concerned denial of cross-examination. The adjudicating authority had relied heavily on statements of transporters and other persons to allege diversion of goods. However, despite specific requests by the assessee, cross-examination was denied. CESTAT held that this amounted to a gross violation of principles of natural justice. Referring to judicial precedents, the Tribunal observed that statements recorded during investigation cannot be relied upon unless the makers of those statements are examined and made available for cross-examination. The Bench also rejected the Department's attempt to extrapolate findings from a limited sample of transport inquiries to all consignments covered under the 29 authorisations. It observed that the investigation itself admitted that inquiries were conducted only for a limited subset of transactions and many of them were inconclusive. Such partial findings, according to the Tribunal, could not support a demand covering the entirety of imported consignments. On limitation, the Tribunal held that the extended period under Section 28(4) of the Customs Act was not available because all relevant facts were within the Department's knowledge. The imports had been made through normal customs channels, authorisations had been scrutinized by DGFT, EODCs had been issued, and customs bonds had been discharged. Accordingly, no suppression or wilful misstatement could be alleged against the assessee. The Tribunal further set aside the recommendation for criminal proceedings under Section 135 of the Customs Act, observing that the foundation of the case itself had failed. Since the goods were not liable for confiscation, the Revenue's plea for redemption fine was also rejected. The CESTAT allowed the appeals of Kalpena Plastiks and its directors and dismissed the Revenue's appeal in its entirety. The ruling reinforces the legal position that customs authorities cannot disregard valid and subsisting EODCs issued by DGFT without first seeking their cancellation through the appropriate statutory mechanism. Case Details Case Title: Commissioner of Customs (Port), Kolkata Versus M/s Kalpena Plastiks Ltd. Citation: JURISHOUR-1380-CES-2026(KOL) Case No.: Customs Appeal No.76048 of 2019 Date: 22 MAY 2026 Counsel For Appellant: Ankit Kanodia & Ms.Megha Agarwal Counsel For Respondent: S.Dutta, Authorised Representative Click Here To Read Order Read More: Third-Party Diaries Alone Can’t Prove Clandestine Removal | CESTAT Quashes Excise Demand Against Steel Manufacturer

Customs Can’t Override Valid DGFT EODC: CESTAT

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