Customs demand and penalty fail where scrapping of obsolete machinery was permitted under the governing administrative approval.

Customs demand and penalty were unsustainable where obsolete imported machinery under the EPCG scheme, later linked to a 100% EOU arrangement, had been permitted for scrapping by the competent High Powered Grievance Redressal Committee. The Board's circular required customs field authorities to act in conformity with the Development Commissioner's clarification in cases involving alleged infraction of duty-exemption conditions. Because the impugned order ignored that administrative permission and still confirmed demand, it was set aside and the appeal was allowed.

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Issues: Whether the customs demand and penalty could be sustained when the destruction of obsolete imported machinery was permitted by the High Powered Grievance Redressal Committee and the field authorities were required to act in conformity with the Development Commissioner's clarification.

Analysis: The imported goods were covered by the EPCG scheme and later linked to a 100% EOU arrangement. The competent committee had permitted scrapping of obsolete and redundant machinery, and the Board's circular required customs authorities to proceed in accordance with the Development Commissioner's decision in cases involving infraction of duty exemption conditions. The impugned order did not give effect to that permission and confirmed demand notwithstanding the administrative approval governing the dispute.

Conclusion: The demand and penalty could not be sustained, and the appeal was allowed by setting aside the impugned order.

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