Exemption conditions for 100% EOU imports require competent-authority findings before duty demand, confiscation or penalties can stand.

Duty demand, confiscation and penalties against a 100% EOU for alleged non-fulfilment of export obligation and NFEP could not be sustained without a definite finding from the competent authority, namely the Board of Approval or Development Commissioner, that the exemption conditions had been breached. The tribunal noted that no such conclusive finding existed before the show-cause notice or adjudication, and the issue had also been kept in abeyance in rehabilitation proceedings. The adjudication was therefore premature and unsustainable, the impugned order was set aside, and the matter was remanded for de novo adjudication after the requisite competent-authority finding.

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Issues: Whether the duty demand, confiscation and penalties imposed on a 100% EOU for alleged non-fulfilment of export obligation and NFEP could be sustained before the Development Commissioner or Board of Approval had recorded a definite finding on breach of the exemption conditions, and whether the matter required remand for fresh adjudication.

Analysis: The duty exemptions under the relevant customs and central excise notifications were conditional upon fulfilment of the export obligation and achievement of NFEP. The governing Board circular and the earlier tribunal view relied upon by the Court recognised that liability to duty on goods imported or procured duty-free by a 100% EOU could be confirmed only after the competent authority, namely the Board of Approval or Development Commissioner, had reached a definite conclusion that the exemption conditions had been violated or remained unfulfilled. On the record, no such definitive finding had been made before issuance of the show-cause notice or before adjudication. The materials also showed that the question had been kept in abeyance in view of rehabilitation proceedings.

Conclusion: The adjudication was premature and unsustainable at that stage. The impugned order was set aside and the matter was remanded for de novo adjudication after obtaining the competent authority's finding on fulfilment of export obligation and NFEP.

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