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Issues: (i) whether transfer of imported duty-free raw material from one EOU to another EOU required a separate showing of valid reasons under paragraph 6.16 of the EXIM Policy 2002-2007; and (ii) whether the Revenue could sustain duty demand for alleged non-compliance with the exemption conditions and policy restrictions.
Issue (i): whether transfer of imported duty-free raw material from one EOU to another EOU required a separate showing of valid reasons under paragraph 6.16 of the EXIM Policy 2002-2007.
Analysis: The relevant policy provisions were read to distinguish between sale of unutilised material to a DTA unit and supply from one EOU to another EOU. The requirement of valid reasons was held to apply to disposal in DTA, while inter-unit supply to another EOU was not treated as being subject to the same restriction. The contemporaneous events examined by the Commissioner were also found to constitute a valid basis for the transfer in any event, and the departmental circular was treated as binding on officers.
Conclusion: The transfer to another EOU was permissible and did not fail for want of valid reasons.
Issue (ii): whether the Revenue could sustain duty demand for alleged non-compliance with the exemption conditions and policy restrictions.
Analysis: The Tribunal found that the Commissioner had already examined the sequence of permissions, import, transfer and renewal of job-work permission, and had correctly concluded that the facts did not justify confiscatory or duty-demand consequences. Since the policy and circular were construed in favour of permitting the inter-unit transfer, the Revenue's challenge to the dropping of proceedings had no merit.
Conclusion: The duty demand and Revenue's challenge were not sustainable.
Final Conclusion: The appeal failed and the order dropping the proceedings was upheld, leaving the assessee free from the demanded duty liability.
Ratio Decidendi: Under paragraph 6.16 of the EXIM Policy 2002-2007, inter-unit transfer of unutilised duty-free goods from one EOU to another is not barred merely because a separate valid reason is not demonstrated in the same manner as for DTA disposal, and departmental circulars clarifying the policy are binding on the authorities.
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