Inter-unit transfer of bonded EOU goods: prior permission and broad capital goods scope supported exemption, with no revenue loss shown.

Inter-unit transfer of duty-free bonded goods imported under the EOU scheme was examined against the customs notification, the foreign trade policy and Board circulars. The analysis states that capital goods could be transferred to another EOU/STP unit on prior intimation or permission, and that the customs authorities could not reopen the basic exemption eligibility once the goods had been imported under the notification and continued in bond. It further notes that the definition of capital goods was treated broadly and that no revenue loss was shown. On that basis, the duty demand, interest and penalties were treated as unsustainable.

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Issues: Whether duty, interest and penalties were sustainable on inter-unit transfer of duty-free bonded goods, namely modular furniture and anti-static carpets, imported under the EOU scheme after permission from the Development Commissioner and Customs authorities.

Analysis: The goods were imported duty-free under the relevant customs notification and transferred only after obtaining the necessary permissions. The applicable foreign trade policy permitted transfer of capital goods to another EOU/STP unit on prior intimation, and the Board's circulars clarified the scope of inter-unit transfer. The definition of capital goods under the scheme was treated as wide, and the Customs authorities could not re-agitate eligibility to the exemption once the goods had been imported under the notification and remained in customs bond. The transfer was held not to violate the conditions governing inter-unit transfer, and no revenue loss was shown.

Conclusion: The duty demand, interest and penalties were unsustainable and were set aside in favour of the assessee.

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