Clandestine DTA clearances by an EOU from duty-free inputs justified duty demand and sustained Revenue's case.

Duty demand on finished goods cleared clandestinely by a 100% Export Oriented Unit into the Domestic Tariff Area from duty-free imported inputs was sustained because the record showed parallel invoices, unaccounted removals, and misuse of the exemption scheme. The adjudicating authority's findings of illegal diversion and clandestine clearance were supported by specific evidence, and no basis was found to interfere with those findings. The challenge therefore failed, and the demand was upheld in favour of the Revenue.

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Issues: Whether duty demand was sustainable in respect of finished goods clandestinely cleared to the Domestic Tariff Area by a 100% Export Oriented Unit using duty-free imported raw material.

Analysis: The demand related to fabrics manufactured out of duty-free imported inputs and cleared without payment of duty. The records showed detailed findings of clandestine and illegal clearance, parallel invoices, and misuse of the exemption available to the unit. The adjudicating authority had recorded specific evidence of unaccounted clearances and diversion of goods to the Domestic Tariff Area, and no reason was found to interfere with those findings.

Conclusion: The duty demand was upheld and the challenge failed; the finding was against the assessee and in favour of the Revenue.

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