Duty liability on semi-finished goods cleared for job work outside a 100% Export Oriented Unit remains under the exemption notification scheme.

A 100% Export Oriented Unit that clears semi-finished fabrics for job work outside the factory, and does not receive them back within the stipulated period, remains liable to duty under the applicable exemption notification. The notification permitted temporary removal for processing, but also contemplated duty liability where the goods or resulting articles were not returned as required. On the stated facts, the cleared fabrics were treated as semi-finished goods covered by the notification scheme, and duty could be demanded on the cleared material despite the final made-up articles not being manufactured in the unit.

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Issues: Whether semi-finished fabrics cleared by a 100% Export Oriented Unit for job work and not returned were chargeable to duty under the applicable exemption notification and the Central Excise law.

Analysis: The goods were cleared from the unit for processing outside the factory and were not returned within the stipulated period. The applicable notification permitted temporary removal of goods for job work, but also provided that where articles were not excisable, duty equivalent to the customs duty on the imported inputs used in their manufacture became payable. On the facts, the cleared fabrics were treated as semi-finished goods sent for further processing, and the notification covered such a situation. The claim that no duty could arise merely because the final made-up articles were not manufactured in the factory was not accepted for the purpose of denying duty on the cleared material.

Conclusion: Duty was payable on the semi-finished fabrics cleared for job work, and the remand direction for redetermination of duty was upheld.

Final Conclusion: The appeal failed because the clearance of semi-finished goods for job work attracted duty under the exemption notification framework applicable to a 100% Export Oriented Unit.

Ratio Decidendi: Where a 100% Export Oriented Unit clears goods, including partially processed goods, for job work outside the unit and the goods are not returned, the liability to duty is governed by the applicable exemption notification, and duty can be demanded on the cleared material in accordance with the notification scheme even if the final product was not manufactured in the unit.

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