EOU duty demand held premature before final de-bonding, with waiver of pre-deposit and stay of recovery granted.

An EOU remained under bond until a final de-bonding order was issued by the competent authority, so duty demand and recovery proceedings against imported or indigenous capital goods were premature before that stage. The applicable procedure and circulars treated duty liability as arising only on de-bonding, and depreciation was to be considered when duty was later computed. On that basis, the Tribunal granted complete waiver of pre-deposit and stay of recovery pending the appeals.

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Issues: Whether the duty demand and recovery proceedings against a 100% export-oriented unit were premature in the absence of a final de-bonding order from the Development Commissioner, and whether the appellants were entitled to waiver of pre-deposit and stay of recovery.

Analysis: The unit continued to be treated as an EOU until the date of final de-bonding. The applicable circulars and procedure contemplated de-bonding only on approval of the Development Commissioner, with duty liability arising at the time of de-bonding. Since no de-bonding order had yet been issued, the capital goods were still deemed to remain under bond and the demand could not be treated as mature. The Tribunal also relied on its earlier view that in such circumstances the demand is premature and the matter has to await de-bonding, with depreciation being taken into account when duty is computed.

Conclusion: The demand was held to be premature, and the appellants were granted complete waiver of pre-deposit with stay of recovery during pendency of the appeals.

Ratio Decidendi: In the case of an EOU, no enforceable duty demand on imported or indigenous capital goods can be sustained before final de-bonding by the competent authority, because the unit remains under bond until such order is passed.

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