By Meraki Carriers
Case Background
Under the EPCG scheme, exporters import machinery or tools for zero-duty on the condition that they fulfill an export obligation six times the duty saved, within six years. The DGFT (Department of Commerce) classifies certain equipment—including spares, jigs, dies, and CAD systems—as “capital goods” eligible for duty exemptions under EPCG.
However, friction arises when Customs disagrees with DGFT’s classification—something this HC ruling directly addresses.
What the Court Ruled
The Madras High Court clarified that:
1. DGFT’s classification is authoritative. Customs cannot disregard an item labeled as capital goods by DGFT and reclassify it to impose duties or IGST.
2. Customs status-checks (like installation or usage) must align with DGFT categorizations—they cannot impose additional or contradictory interpretations.
3. The ruling strengthens exporters’ procedural safeguards by confirming alignment between DGFT and Customs under EPCG.
This follows trends in other jurisdictions, such as the Bombay High Court upholding IGST exemptions for EPCG imports, and Gujarat HC affirming that EPCG-linked imports are exempt from additional/custom duty.
How This Helps Exporters
– Streamlined compliance: Once DGFT approves an item under EPCG, Customs cannot subsequently question that classification.
– Cost certainty: Significantly reduces the risk of surprise duties or charges post-import.
– Legal clarity: Aligns administrative practice with judicial precedent, preventing repeated disputes.
Practical Tips for Meraki Carriers
1. Archive DGFT documentation meticulously—classification letters, schedules, and installation paperwork.
2. Include clear references to DGFT authorization and classification during Customs clearance—for example, in shipping bills or installation certificates.
3. Challenge any Customs rejection early on, invoking this judicial ruling to avoid delays or duty calls.
Final Takeaway
This Madras High Court verdict reinforces a fair, unified regulatory environment under EPCG—protecting exporters from inconsistent Customs actions once DGFT’s classification is in place.
Meraki Carriers is committed to keeping exporters abreast of critical legal and policy developments. If you’re planning EPCG imports or facing Customs resistance, reach out to us—we’ll help secure your capital goods classification and safeguard your compliance.
Disclaimer: This blog provides general information and does not constitute legal advice. Always consult a qualified professional for personalized guidance.