EOU export obligation compliance under DEPB shipping bills failed without prior Development Commissioner determination, so duty demand fell.

A 100% EOU's duty, interest and penalty demand for exports routed through a merchant exporter under DEPB shipping bills was found unsustainable because the customs authorities had not first obtained a definite determination from the Development Commissioner on any failure to fulfil export obligations under the EOU scheme. Although the export procedure used was inconsistent with the EOU framework, the merchant exporter stated that no export benefit had been claimed and that the wrong shipping bills were filed by oversight. Board circulars required prior conclusion by the Development Commissioner before customs could confirm duty liability, and that prerequisite was absent. The demand and penalties were set aside.

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Issues: Whether the demand of duty, interest and penalty against a 100% EOU for goods exported through a merchant exporter under DEPB shipping bills could be sustained without a definite determination by the Development Commissioner on non-fulfilment of export obligations under the EOU scheme.

Analysis: The export policy permitted an EOU to export through a merchant exporter, but only subject to the scheme conditions, including continued discharge of export obligation and compliance with the parameters of the EOU scheme. The exports in question were made under DEPB shipping bills, which was inconsistent with the governing procedure for EOU exports. However, the merchant exporter had informed the customs authorities that no export benefit had been claimed and that the wrong shipping bills had been filed by oversight. More importantly, the Board's circulars required the customs authorities to confirm duty demand in cases of alleged failure to fulfill export obligation only after the Development Commissioner had reached a definite conclusion on liability. The record did not show any such prior determination by the Development Commissioner, and the lower authorities were bound by the circulars.

Conclusion: The duty demand and penalties were not sustainable and were set aside.

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