DGFT’s EPCG Classification Is Binding on Customs SC Ruling Explained
The goods classification under EPCG by DGFT is now legally binding on Customs, as held by the Supreme Court. This landmark judgment brings clarity for exporters and importers availing the Export Promotion Capital Goods (EPCG) Scheme under the Foreign Trade Policy (FTP). Here’s what it means for you.
What is EPCG and Why Classification Matters?
Under the EPCG Scheme, eligible Indian exporters can import capital goods at zero customs duty, subject to export obligations. The key to availing this benefit lies in proper classification of goods.
But disputes often arise between the DGFT (Directorate General of Foreign Trade) and Customs authorities over the correct Harmonised System of Nomenclature (HSN) code or product classification. This impacts duty exemption.
Until now, Customs could override DGFT’s classification — but not anymore.
Supreme Court Verdict: DGFT Classification is Final
In Commissioner of Customs vs. Steel Authority of India Ltd. (Civil Appeal No. 7904/2012, decided on 13 June 2024), the Supreme Court clarified:
“Once DGFT issues an EPCG licence for a product under a particular classification, Customs is bound to follow it at the time of import clearance. Reassessment by Customs is not permitted.”
Legal Reference:
- Foreign Trade Policy provisions
- Customs Act, 1962
- Foreign Trade (Development and Regulation) Act, 1992
- Para 2.63 of FTP 2023: Clarifies classification powers lie with DGFT
What Changes for Indian Exporters?
Here’s how this ruling will impact you:
✅ Reduced Litigation: No more tug-of-war between DGFT and Customs on product classification
✅ Faster Clearance: Customs must clear goods as per EPCG licence terms
✅ Certainty in Planning: Businesses can confidently rely on DGFT’s classification while importing
Step-by-Step: What to Ensure Before Importing under EPCG
- Get Classification Right: Apply to DGFT with complete technical specs of capital goods
- Mention Correct HSN Code: Match your application with Customs tariff
- Retain Licence Copy: Keep the EPCG licence handy at the time of clearance
- Point to the Supreme Court ruling if Customs queries classification
Expert View: Don’t Take Shortcuts
“Many exporters rely on consultants without double-checking the HSN code. Post this ruling, your DGFT classification is your legal shield—use it wisely,” says Anup Daga, Indirect Tax Advisor.
Tip: File an Advance Authorisation or get a clarification from DGFT early, especially if your capital goods fall in ambiguous tariff zones.
Comparison Table: Pre vs Post Ruling Scenario
| Aspect | Before SC Ruling | After SC Ruling |
|---|---|---|
| Who decides classification? | DGFT + Customs (often disputed) | DGFT only (final authority) |
| Can Customs reclassify goods? | Yes, often triggered litigation | No, bound by DGFT |
| Clearance speed | Delayed due to verification | Faster clearance |
| Legal clarity | Ambiguous | Clear legal precedent |
Government Sources to Read Further
FAQ: Goods Classification under EPCG
Q1. Can Customs reject an EPCG licence classification?
No. As per SC ruling, once DGFT classifies goods under EPCG, Customs cannot reassess or override it.
Q2. What if DGFT made a mistake in HSN code?
Apply for an amendment or clarification from DGFT before import to avoid disputes.
Q3. Is this applicable to all FTP schemes?
This ruling specifically deals with EPCG, but the principle may influence similar schemes under FTP.
Summary
The Supreme Court ruled that goods classification under EPCG by DGFT is binding on Customs. This means importers can rely on their EPCG licence HSN without fearing reclassification. It brings legal clarity, faster clearance, and reduced litigation under the FTP regime.
Conclusion: What You Should Do Next
If you’re importing capital goods under EPCG, get your classification vetted and approved by DGFT — that’s now your strongest legal defence.
Need help with EPCG or FTP compliance?
Let Efiletax assist you with DGFT applications, EPCG filing, and smooth customs clearance.
👉 Talk to an expert at Efiletax.in