Clarification on EPCG Scheme Amendment Applicability
Issued by: Directorate General of Foreign Trade (DGFT)
Date: December 13, 2024
Key Highlights
- Policy Circular No. 10/2024-25:
The DGFT clarified the applicability of amendments to Para 5.10(c) of the Hand Book of Procedures (HBP) 2015-20 (Mid-term Review). - Judicial Background:
The Ahmedabad High Court’s Judgment (2023) in South Gujarat Warp Knitters Association & Another v. DGFT nullified Policy Circular No. 22/2015-20 dated March 29, 2019.
The Supreme Court, on August 2, 2024, dismissed the Union of India’s Special Leave Petition (SLP) challenging the Ahmedabad High Court’s decision, making the ruling final.
- Clarification Issued by DGFT:
The amendment to Para 5.10(c) of HBP, 2015-20, is prospective.
It applies only to third-party exports under EPCG (Export Promotion Capital Goods) Authorisations issued on or after December 5, 2017.
Background on the EPCG Scheme
The EPCG scheme allows import of capital goods at zero customs duty, subject to an export obligation.
Para 5.10(c) of the HBP deals with third-party exports, i.e., exports made by entities other than the authorization holder.
Implications of the Clarification
- Prospective Application:
The amendment does not apply retrospectively; only EPCG Authorisations issued on or after December 5, 2017 are covered.
This ensures no retrospective liability for exporters operating under earlier guidelines.
- Judicial Compliance:
By issuing this clarification, the DGFT complies with the Ahmedabad High Court judgment and the Supreme Court’s dismissal of the SLP.
- Impact on Third-Party Exports:
The clarification resolves ambiguity for businesses involved in third-party exports under the EPCG scheme.
This policy circular provides a clear framework for exporters and aligns with judicial directives, ensuring transparency and predictability for stakeholders under the EPCG scheme.
