100% EOU debonding: goods exported before final exit order are not deemed DTA clearances for duty purposes.

A 100% EOU remains entitled to EOU status until the final debonding order is issued, and goods exported during the interregnum after in-principle debonding are not treated as deemed DTA clearances. Where finished goods were exported under bond before final debonding, duty under the proviso to Section 3(1) of the Central Excise Act, 1944 was not payable on that basis. In that setting, excess duty paid on the finished goods was not recoverable as duty from a deemed domestic clearance, and the refund claim was maintainable.

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Issues: Whether duty was payable on finished goods lying in stock at the stage of in-principle debonding of a 100% EOU when those goods were exported before the final debonding order, and whether refund was admissible of the excess duty paid.

Analysis: Under Note (ii) to Appendix 14-I-L of the Handbook of Procedure, a 100% EOU continues to be treated as such till the date of the final exit order. The relevant scheme also permits the unit, during the interregnum between the no objection certificate and the final debonding order, to export goods under advance authorization/DEPB/duty drawback. The finished goods were not cleared into the domestic tariff area; instead, they were exported under bond before final debonding. In these circumstances, duty could not be demanded on the footing of deemed DTA clearance under the proviso to Section 3(1) of the Central Excise Act, 1944.

Conclusion: The excess duty paid on the finished goods was not recoverable and the refund claim was maintainable in favour of the assessee.

Ratio Decidendi: A 100% EOU remains an EOU until final debonding, and finished goods exported before that stage are not liable to duty as if cleared into the domestic tariff area.

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