Exemption under import notification preserved where 100% EOU goods were unusable rejects, and extended limitation was not available.

Imported raw materials from a 100% EOU were not shown to have been removed as such so as to attract denial of exemption under Notification No. 53/97-Cus.; the record indicated prior intimation to the department that the goods had deteriorated in quality, had become unusable, and were permitted to be sent for re-drawing on job work. On that basis, the materials were treated as unusable rejects or waste rather than cleared as usable imported goods, and the demand was held not sustainable. Because the department had prior notice through letters and statements, suppression was not established and the extended period was held time barred.

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Issues: Whether imported raw materials cleared from a 100% EOU were removed as such so as to forfeit exemption under Notification No. 53/97-Cus. dated 03.06.1997, and whether the show cause notice invoking the extended period was time barred.

Analysis: The imported materials were brought into the unit for manufacture of export goods, but the record showed that the assessee had informed the department that the goods had deteriorated in quality due to long storage and had become unusable. Permission was also sought and granted for sending the materials for re-drawing on job work basis, which supported the conclusion that the goods had lost utility and were not being cleared as usable imported goods. The department had prior notice of the situation through letters and statements, and the materials were cleared on payment of duty. In these circumstances, the allegation of removal as such was not established. As the facts were disclosed to the department, there was no suppression warranting invocation of the extended period.

Conclusion: The demand was not sustainable. The goods were treated as unusable rejects or waste rather than having been cleared as such, and the show cause notice was time barred.

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