Binding pre-condition for customs recovery against a 100% EOU failed, so duty demand, confiscation and penalties could not stand.

Customs and central excise recovery against a 100% EOU could not be sustained where the binding circular made confirmation contingent on a definite adverse finding by the Development Commissioner. The record showed that the Development Commissioner had dropped the proceedings, and those orders had attained finality, so the foundational pre-condition for duty recovery, confiscation and penalty was absent. On that basis, the Tribunal held that the adjudicating authority's proceedings were unsustainable and the impugned demand and penal order failed.

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Issues: Whether the customs and central excise duty demands, confiscation and penalties could be sustained when the Development Commissioner had dropped the proceedings and the binding departmental circular required a definite conclusion by that authority before recovery action.

Analysis: The earlier round of litigation had held that duty recovery proceedings against a 100% EOU could be initiated only after the Development Commissioner's recommendation or definite conclusion on failure to fulfil export obligations. The binding circular governing such cases required the customs demand to be confirmed only after that stage. The record showed that the Development Commissioner had dropped the proceedings and that subsequent attempts to revisit that conclusion were not legally sustainable. As the unchallenged orders of the Development Commissioner had attained finality, the foundational condition for confirming duty, confiscation and penalty was absent.

Conclusion: The proceedings initiated by the adjudicating authority were unsustainable and the impugned order was set aside in favour of the assessee.

Final Conclusion: The Tribunal held that recovery action could not proceed in the absence of a definitive adverse finding by the Development Commissioner, and the entire demand and penal order failed.

Ratio Decidendi: Where a binding circular makes confirmation of duty recovery contingent upon a definite conclusion by the competent development authority, customs and excise proceedings cannot be sustained unless that pre-condition is satisfied and has attained finality.

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