Jurisdiction after EOU debonding shifts to Central Excise authority, and Customs cannot adjudicate the notice.

Once a unit is debonded from EOU status and becomes a DTA unit, jurisdiction to adjudicate a show cause notice demanding Central Excise duty and denying Cenvat credit vests in the Central Excise authority, not the Customs authority. A circular limited to EOUs cannot sustain Customs adjudication after debonding, because the unit is no longer under Customs administration on the date of notice. The Customs adjudication was therefore held without jurisdiction, the order was set aside, and the matter was remanded to the competent Central Excise authority for fresh decision after effective hearing.

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Issues: Whether the Commissioner of Customs had jurisdiction to adjudicate a show cause notice issued after the unit had been debonded from EOU status and had become a DTA unit.

Analysis: The unit was no longer functioning as a 100% EOU when the show cause notice was issued. The circular relied on by the department applied only to EOUs, and once the unit stood debonded it went out of the administrative control of the Commissioner of Customs and came within Central Excise administration. Since the proceedings proposed demand of Central Excise duty and denial of Cenvat credit against a unit that was not then an EOU, the adjudicatory power lay with the Commissioner of Central Excise and not with the Commissioner of Customs.

Conclusion: The Commissioner of Customs lacked jurisdiction to adjudicate the matter; the objection was accepted in favour of the appellant.

Final Conclusion: The impugned order was set aside and the matter was sent to the competent Central Excise authority for fresh adjudication after affording an effective opportunity of hearing.

Ratio Decidendi: Once an EOU is debonded and is no longer an EOU on the date of the show cause notice, jurisdiction to adjudicate Central Excise proceedings vests in the Central Excise authority and cannot be exercised by the Customs authority under a circular applicable only to EOUs.

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