Prior intimation to the Development Commissioner is required before duty demand against a 100% EOU for alleged bonded goods removal.

In proceedings against a 100% Export Oriented Unit for alleged removal of bonded goods, duty demand could not be sustained unless the alleged violation was first brought to the notice of the Development Commissioner under the governing Board circulars. The Tribunal read Circular No. 21/95-Cus. and Circular No. 122/95-Cus. together and held that the later circular did not amend or override the earlier clarification. As no reference had been made to the Development Commissioner or the Board of Approval before or after the notice, the demand proceedings and connected penalties were set aside, and the Revenue's challenge failed.

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Issues: Whether a show cause notice demanding duty from a 100% Export Oriented Unit for alleged removal of bonded goods could be issued without prior intimation to the Development Commissioner, in the light of the Board's circulars.

Analysis: The Tribunal held that the question was already covered by its earlier decision, which construed Circular No. 21/95-Cus. and Circular No. 122/95-Cus. to mean that duty demand against a 100% EOU for alleged violation of the conditions governing such units could be pursued only after the alleged violation was brought to the notice of the Development Commissioner. On an independent reading of the circulars, it was found that the later circular did not amend or override the earlier clarification. The record showed that no reference had been made to the Development Commissioner or the Board of Approval before or after issuance of the notice.

Conclusion: Prior intimation to the Development Commissioner was required, and the demand proceedings without such reference were not sustainable. The appeal of the Revenue failed.

Final Conclusion: The order setting aside the duty demand and connected penalties was upheld, and the Revenue's challenge was rejected.

Ratio Decidendi: In a proceeding against a 100% EOU for alleged removal of bonded goods, a show cause notice for duty demand cannot be sustained unless the alleged violation is first intimated to the Development Commissioner in terms of the governing Board circulars.

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