Transfer between 100% EOUs and condoned export shortfall cannot, by itself, justify duty demand.
A 100% EOU may transfer imported or indigenously manufactured goods to another 100% EOU for use, export, or further manufacture without separate permission, and duty can be demanded only if the clearances are shown to be DTA clearances. Where the Development Commissioner, as the competent authority, condones the shortfall in export obligation and accepts fulfilment of the letter of permission conditions, the department cannot treat the unit as a defaulter for that period or sustain duty demand on the basis of breach of export conditions. On that footing, duty demand is not sustainable.
Issues: Whether duty demand on duty-free imported and indigenously procured goods could be sustained when the shortfall in export obligation was condoned by the Development Commissioner and the clearances were made to another 100% EOU.
Analysis: Circular No. 13/95-Cus. clarified that a 100% EOU may transfer imported or manufactured goods to another 100% EOU for use, export, or further manufacture without requiring separate permission. The only basis for demanding duty on such clearances would be proof that they were in fact DTA clearances. On the question of export obligation, Circular No. 21/95-Cus. recognised the Development Commissioner as the competent authority to determine whether the unit had fulfilled the prescribed obligation and achieved the minimum NFEP. Once the Development Commissioner condoned the shortfall and accepted fulfilment of the conditions of the letter of permission, the department could not treat the unit as a defaulter for that period or sustain duty demand on the imported or indigenous goods on that basis.
Conclusion: The duty demand was not sustainable, and the Revenue's appeal failed.
Ratio Decidendi: Where the competent authority condones the shortfall in export obligation, and transfer of goods is shown to be between 100% EOUs, duty cannot be demanded on the footing of breach of export conditions or unauthorised DTA clearance.
TaxTMI 
AI Drafter ✕
TaxTMI 
