Customs duty demand against a 100% EOU fails where prescribed procedure and Development Commissioner reference were not followed.

For a 100% export oriented unit, customs duty demands on imported inputs and capital goods could not be sustained where recovery was initiated without a reference to the Development Commissioner and without following the prescribed procedure. The Tribunal noted that the adjudication proceeded on alleged non-fulfilment of export obligation and unauthorised clearances, but no prior finding from the Development Commissioner had been obtained. Relying on earlier Tribunal rulings, it held that recovery proceedings in such circumstances were premature and procedurally invalid. The demand was therefore not confirmed, and the revenue appeal failed.

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Issues: Whether duty demands against a 100% Export Oriented Unit could be sustained without a reference to the Development Commissioner and without following the prescribed procedure before recovery of customs duty on imported inputs and capital goods.

Analysis: The order under challenge proceeded on the basis that the assessee, being a 100% EOU, had allegedly failed to fulfil export obligation and had effected clearances without permission. The Tribunal noted that the Commissioner had found no reference to the Development Commissioner before adjudication and had relied on earlier Tribunal decisions holding that recovery proceedings in such circumstances could not be initiated without the Development Commissioner's specific finding that export obligations had not been fulfilled. Since the prescribed procedure was not followed, the demand could not be confirmed.

Conclusion: The demand was not sustainable and the revenue appeal failed.

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