Customs Dept. Directed to Compensate for Denial of EPCG Duty Benefit Despite Valid Licence: Madras High Court
High Court Orders Compensation Over Arbitrary Rejection of Concessional Duty Claim.
The Madras High Court has ordered the Customs Department to pay compensation for denying concessional import duty under the Export Promotion Capital Goods (EPCG) scheme, despite the importer holding a valid licence and supportive policy directives.
The bench of Justice Dr. Anita Sumanth and Justice N. Senthilkumar declared that the Customs authorities had acted arbitrarily and in contradiction to binding directions issued by the Directorate General of Foreign Trade (DGFT) and the Central Board of Indirect Taxes and Customs (CBIC), by causing unnecessary litigation and financial strain for over 25 years.
The case involved the import of lighting equipment by a hotel in 1999 under the EPCG scheme, which offers reduced customs duties for capital goods used in service sectors such as hospitality. Though the DGFT had recognised the imported goods as “capital goods” eligible for the scheme, the Customs Department denied the benefit, forcing the importer to pay full duties under protest.
Despite a clear 2002 CBEC circular and Supreme Court rulings upholding similar benefits for hotels, the department continued to challenge the importer’s claims, eventually leading to a favourable ruling by the Customs Tribunal in 2018. However, the issue of compensatory interest remained unresolved.
The Court came down heavily on the Customs Department, stating that it had taken a stance “diametrically opposed” to both the EPCG licence terms and CBEC’s policy instructions. Citing past Supreme Court decisions such as Titan Medical Systems and Appu Hotels, the Court reaffirmed that Customs officials are bound to respect DGFT-issued licences unless they are lawfully revoked.
“The long-drawn litigation from 1999 till now, 2025, was misconceived and needless,” the Court observed, adding that the Customs Department’s conduct had “no justification” and violated settled legal and administrative principles.
Case Details
Case Title: M/s.Adyar Gate Hotel Ltd. Versus The Commissioner of Customs
Case No.: C.M.A. Nos.71 & 131 of 2025
Date: 03.06.2025
Counsel For Petitioner: Hari Radhakrishnan
Counsel For Respondent: Rajnish Pathiyil
Mariya is the Senior Editor at JurisHour. She has 5+ years of experience on covering tax litigation stories from the Supreme Court, High Courts and various tribunals including CESTAT, ITAT, NCLAT, NCLT, etc. Mariya graduated from MLSU Law College, Udaipur (Raj.) with B.A.LL.B. and also holds an LL.M. She started as a freelance tax reporter in the leading online legal news companies like LiveLaw & Taxscan.
