Premature duty demand on bonded EOU capital goods was unsustainable before de-bonding and domestic clearance.

Duty could not be demanded on photocopier machines held by a 100% EOU while the goods remained in the bonded area and had not yet been de-bonded. The Development Commissioner had permitted clearance to the domestic tariff area on payment of applicable duty and compliance with customs formalities, but that permission did not make the demand immediately enforceable. The duty obligation arose only when the capital goods were actually cleared from bond and sent to the domestic tariff area. On that basis, the premature demand was not sustainable and relief was granted to the assessee.

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Issues: Whether duty could be demanded on photocopier machines obtained duty-free by a 100% EOU while the goods remained in the bonded area and before de-bonding, despite permission from the Development Commissioner for clearance to the domestic tariff area on payment of duty.

Analysis: The goods were still within the bonded area and the Development Commissioner had granted permission under the Exim Policy to dispose of the unutilized capital good in the domestic tariff area on payment of applicable duties and compliance with customs formalities. In such circumstances, the demand of duty before the goods were cleared from bond was premature. The clearance obligation would arise when the goods were actually de-bonded and sent to the domestic tariff area.

Conclusion: The duty demand was not sustainable at that stage, and the appeal was allowed in favour of the assessee.

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