Premature duty demand against a 100% EOU was set aside pending expiry of licence and circular-based procedure.

Duty demand and penalty against a 100% EOU were treated as premature because the licensing period had not expired and the capital goods continued under customs bond. The matter was to be dealt with under the Board circular governing cases of non-fulfilment of export obligation, including consultation with the Development Commissioner or the Commerce Ministry before Customs action. On that basis, the impugned order was set aside and the matter remanded for further action in accordance with the applicable circular procedure.

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Issues: Whether demand of duty and penalty against a 100% EOU was premature when the licensing period had not expired and the capital goods continued to remain under bond, and whether the matter had to be dealt with in accordance with the Board circular governing such cases.

Analysis: The licensing period had not expired and the capital goods were still under customs bond. In such circumstances, confirmation of duty demand was held to be premature. The order also noted that in matters relating to non-fulfilment of export obligation, action by Customs was to be taken in consultation with the Development Commissioner or the Commerce Ministry, as clarified in the relevant Board circular.

Conclusion: The demand was held to be premature, the impugned order was set aside, and the matter was remanded to the Commissioner for further action in accordance with the applicable circular procedure.

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