Substantive exemption for EOU capital goods upheld despite procedural lapse in prior departmental intimation.

Duty-free capital goods procured by a 100% EOU and installed in an adjoining unit for captive power supply were treated as satisfying Notification No. 22/2003-CE because the goods were used in connection with the assessee's manufacturing and export activity. Prior intimation to the Department before transfer was regarded as a procedural requirement, and its omission was treated as a minor lapse that did not defeat the substantive exemption. The notification's object was held to have been fulfilled, so denial of the benefit was unwarranted and the Revenue's appeal was rejected.

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Issues: Whether duty-free capital goods procured by a 100% EOU and installed in the adjoining unit of the same owner, for use in supplying power to the assessee, satisfied the conditions of Notification No. 22/2003-CE despite intimation to the Department before transfer.

Analysis: The capital goods were acquired for use in the assessee's export-oriented unit and were in fact used in connection with production through the captive power arrangement. The requirement of prior intimation before transfer was treated as a procedural condition, and the object of the notification was held to be fulfilled because the goods served the manufacturing and export activity of the EOU. The omission to intimate the Department was treated as a minor infraction and not a ground to deny the substantive exemption.

Conclusion: The conditions of the exemption notification were substantially complied with, and denial of the benefit was unwarranted. The Revenue's appeal was rejected.

Ratio Decidendi: Substantive exemption cannot be denied for a mere procedural lapse where the core statutory condition of use of duty-free capital goods for manufacture and export is satisfied.

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