Prima facie doubt over customs duty on cotton waste cleared by an EOU justified waiver of pre-deposit and stay.

Cotton waste cleared by a 100% Export Oriented Unit to the domestic tariff area was treated as attracting customs duty under para 7 of Notification No. 53/97-Cus., but the same goods had also been treated by excise authorities as excisable and given the benefit of Notification No. 6/97-C.E., with the excise demand dropped. Because the duty liability on the same goods was therefore not free from doubt, the appellants made out a strong prima facie case against the customs demand and were granted waiver of pre-deposit and stay of recovery.

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Issues: Whether the appellants were entitled to waiver of pre-deposit and stay of recovery of the customs duty demanded on cotton waste cleared to the domestic tariff area by a 100% Export Oriented Unit.

Analysis: The duty demand arose on the footing that cotton waste cleared from the unit attracted customs duty under para 7 of Notification No. 53/97-Cus. The record showed that the same goods had also been treated by the excise authorities as excisable, with the benefit of Notification No. 6/97-C.E. having been granted and the excise demand dropped. On these undisputed facts, the duty liability on the same goods was not free from doubt and the appellants had made out a strong prima facie case against the customs demand.

Conclusion: The appellants were entitled to waiver of pre-deposit and stay of recovery of the demanded customs duty.

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