Inter-EOU transfer of duty-free imported inputs under CT-3 procedure is permissible where policy and notification requirements are met.

Duty-free imported inputs transferred from one EOU to another EOU under CT-3 procedure were treated as permissible where the movement had departmental approval and complied with Notification No. 52/2003-Cus and the Foreign Trade Policy. Paragraph 4 of the notification allows removal of goods to another export-oriented unit in accordance with the export and import policy, and Paragraph 6.15 of the Foreign Trade Policy specifically permits transfer of unutilised imported goods between EOUs. On that basis, inter-EOU transfer supported by the prescribed procedure was regarded as not attracting duty, with consequent unsustainability of duty demand and penalty.

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Issues: Whether duty-free imported inputs cleared by one EOU to another EOU under CT-3 procedure were permissible under Notification No. 52/2003-Cus and the Foreign Trade Policy, and whether duty and penalty could be demanded for such transfer.

Analysis: The imported goods were transferred from one EOU to another EOU under CT-3 procedure with departmental approval. Paragraph 4 of Notification No. 52/2003-Cus permits removal of goods to another export-oriented unit and permits such movement in accordance with the Export and Import Policy. Paragraph 6.15 of the Foreign Trade Policy specifically permits transfer of unutilized imported goods from one EOU to another EOU. The Tribunal also followed earlier decisions recognising that such inter-EOU transfer does not attract duty where the receiving unit is an EOU and the transfer is supported by the prescribed procedure.

Conclusion: The transfer was permissible and no duty was payable. The demand and penalty were unsustainable.

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