Vivek Jalan
Quick Summary
The Hon'ble Hyderabad CESTAT in the case of M/s SRI HAVISHA HOSPITALITY & INFRASTRUCTURE LTD Vs COMMISSIONER OF CUSTOMS, HYDERABAD [2026-VIL-371-CESTAT-HYD-CU] dwelt with the Act of Impossibility for EO under EPCG Licenses, due to seizure of machinery itself.
This case is a strong precedent for arguing that impossibility due to government action (seizure) cannot be equated with willful non-compliance. Here are the key pointers:
Key Legal Takeaways
- Act of Impossibility: Courts and tribunals recognize that if machinery is seized, the exporter cannot reasonably fulfill export obligations. This makes penalties and confiscation questionable.
- Notification 28/97 Condition 3: Duty computation must consider permissible exports already made, and depreciation of capital goods. Ignoring these factors makes the demand unsustainable.
- Procedural Fairness: Orders passed without hearing the appellant or considering pending requests (extensions, third-party exports, depreciation) are legally vulnerable.
- Outcome: In such cases, confiscation and penalties are often set aside, and matters remanded for proper re-computation of duty, acknowledging impossibility rather than deliberate default.
Compliance Insight for businesses operating under EPCG
- Always document external factors (like seizure, market conditions) that prevent fulfillment of obligations.
- File timely requests for extensions, third-party exports, and depreciation-based duty computation.
- If penalized, challenge on grounds of natural justice and notification-specific provisions
FAQ :
The case dealt with the impossibility of fulfilling Export Obligations (EO) under EPCG licenses due to the seizure of the machinery itself.
The ruling suggests that impossibility of fulfilling obligations due to government action, such as machinery seizure, cannot be equated with willful non-compliance.
It requires duty computation to consider permissible exports already made and the depreciation of capital goods.
Orders passed without hearing the appellant or considering pending requests for extensions, third-party exports, or depreciation are legally vulnerable.
Confiscation and penalties are often set aside, and matters are remanded for proper re-computation of duty, acknowledging the impossibility of fulfillment.
Businesses should document external factors preventing obligation fulfillment, file timely requests for extensions and depreciation-based duty computation, and challenge penalties on grounds of natural justice.
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