Duty exemption for EOU goods fails when removed outside bonded premises and used beyond export production conditions.

Duty-free goods covered by Notification No. 123/81-C.E. were exempt only when received in a 100% Export Oriented Unit and used within the bonded premises for manufacture of goods meant solely for export. Where the admitted facts showed that the goods were removed outside the EOU and used elsewhere, the conditions of the exemption were not satisfied. The exemption therefore failed, and confiscation, duty demand, redemption fine and penalty were sustained.

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Issues: Whether goods procured duty-free under Notification No. 123/81-C.E. and intended for use in a 100% Export Oriented Unit could be denied the exemption and made liable to confiscation and demand when they were removed outside the bonded premises and used elsewhere.

Analysis: Notification No. 123/81-C.E. exempted capital goods, components, raw materials, consumables, spares and packaging materials when brought into a 100% Export Oriented Undertaking for use in the manufacture and packaging of articles meant solely for export. The benefit was available only when the goods were received in the factory and used within the EOU for export production. On the admitted facts, the goods procured without payment of duty were shifted outside the EOU and were being used outside the bonded premises, which was inconsistent with the conditions of the exemption.

Conclusion: The exemption was not available on the admitted facts, and the confiscation, demand, redemption fine and penalty were upheld. The decision was against the assessee and in favour of the Revenue.

Ratio Decidendi: A duty exemption for goods brought into a 100% Export Oriented Unit is available only when the goods are received and used within the bonded premises for manufacture of goods meant solely for export; removal and use outside the EOU defeats the exemption.

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