Page 129 - SMUGGLING IN INDIA REPORT FOR 2020-2021

CHAPTER 6: FOREIGN TRADE POLICY: MISUSE OF SCHEMES 83
Use of forged documents to fraudulently fulfil Export Obligations against EPCG Authorizations
A case was booked by DRI, wherein an EPCG authorization holder had evaded customs duty by way of non-fulfilment of export obligation. The EPCG authorization holder had obtained eight EPCG authorizations for import of capital goods and machineries, which were to be used for production of plastic packaging products and they were required to fulfil export obligation which was eight times of the Customs duty saved by utilizing such EPCG Authorizations.
On their failure to fulfil the Export Obligation, they fraudulently used export documents of an unsuspecting genuine exporter and obtained the Export Obligation Discharge Certificates (EODCs) from DGFT by fraud, in respect of the said EPCG authorizations. Besides the EPCG Authorization holder, one CA and an agent were booked in this case.
EPCG is often misused by devious importers who misrepresent the facts to DGFT and get licenses issued knowing fully well that they would not be able to fulfil the export obligation within the stipulated time-line. Many importers even resort to outright diversion of capital goods imported duty-free in domestic market , a clear violation of the actual user condition of the imports under EPCG Scheme. There is an embargo on change in ownership of capital goods till the export obligation is met and Export Obligation Discharge Certificate (EODC) is granted by DGFT.
Misuse of Advance Authorization Scheme
Under this scheme, duty-free import of inputs is allowed which are used to manufacture/ produce the export product (making normal allowance for wastage). In addition, fuel, oil, catalyst, which get consumed / utilized in the process of production of export product, may also be allowed.
The quantity of inputs allowed for a given product is based on specific norms defined for that export product, which considers