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Issues: (i) Whether duty demand could be sustained on the footing that the seized yarn and grey fabrics were goods manufactured or obtained by a 100% Export Oriented Unit. (ii) Whether the demand on yarn as a purchaser's stock could be upheld, and whether the matter required remand for fresh consideration.
Issue (i): Whether duty demand could be sustained on the footing that the seized yarn and grey fabrics were goods manufactured or obtained by a 100% Export Oriented Unit.
Analysis: The Revenue relied on the premise that the goods were the stock of a 100% EOU, but no evidence was produced to show that the unit was functioning when the goods were manufactured or obtained, or that the seized quantities represented the closing stock of that unit. Mere non-debonding of the unit was insufficient. Since the burden lay on the Revenue to establish that the goods originated from the 100% EOU, and that burden was not discharged, the demand could not be sustained on that basis.
Conclusion: The duty demand on the yarn and grey fabrics as goods of a 100% EOU was not sustainable and was set aside in favour of the assessee.
Issue (ii): Whether the demand on yarn as a purchaser's stock could be upheld, and whether the matter required remand for fresh consideration.
Analysis: The appellant's claim that the yarn was purchased from the supplier had not been properly examined by the lower authority. The Revenue had raised a prima facie doubt about the purchase claim, but the appellant had not yet produced adequate evidence from the supplier. Since the question whether the yarn was duty-paid purchased stock required factual verification, the issue could not be finally decided at that stage. The grey fabrics, being treated as indigenous production, could not attract duty in the absence of a valid basis for treating them as clandestine or duty-liable stock.
Conclusion: The issue of duty on yarn as purchased stock was remanded to the original adjudicating authority for fresh decision, while the demand and related consequences on grey fabrics were set aside in favour of the assessee.
Final Conclusion: The appeal succeeded to the extent that the duty demand on grey fabrics was deleted, and the yarn dispute was sent back for reconsideration on evidence of purchase and duty-paid nature.
Ratio Decidendi: Where the Revenue alleges that seized goods were manufactured or obtained by a 100% EOU, the foundational fact must be proved by evidence; absent such proof, duty cannot be fastened on that basis, and any separate factual claim of purchase requires independent adjudication.
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