EOU import-export correlation under FIFO permits waiver of pre-deposit where homogenous duty-free goods are properly accounted for.

For 100% EOUs importing duty-free homogenous goods, the Exim Policy Handbook and CBEC circular did not require one-to-one correlation between each import consignment and each export consignment. The unit only had to account for the entire quantity of duty-free goods through exports, DTA sales, transfers and stock balance, and FIFO could be applied for correlation purposes. On that basis, a prima facie case was shown for waiver of pre-deposit and stay of recovery in respect of the duty and penalty demands arising from alleged non-correlation of imports and exports.

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Issues: Whether the appellants had made out a prima facie case for waiver of pre-deposit and stay of recovery in respect of the duty and penalty demands raised on the ground that import consignments were not correlated with export consignments under the EOU scheme.

Analysis: The appellants were a 100% EOU and had imported duty-free man-made fabrics under Notification No. 53/97-Cus. while exporting garments against the export obligation. The demand had been raised on the premise that imports and exports were not one-to-one correlated. The relevant Chapter 6 of the Exim Policy Handbook (1997-2002) stated that a unit must account for the entire quantity of homogenous duty-free goods by exports, DTA sales, transfer and stock balance, but need not correlate every import consignment with each export consignment. The Board's Circular No. 84/2001-Cus. further clarified that for homogenous goods in EOUs, the first-in-first-out procedure may be adopted and co-relation of every import consignment with the corresponding export consignment may not be required. On that basis, the appellants established a prima facie case.

Conclusion: The request for waiver of pre-deposit and stay of recovery was allowed, and recovery of the duty and penalty was stayed pending disposal of the appeal.

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