EOU exemption scope: duty on warehoused goods under valid CT-3 cannot arise before debonding or removal.

Goods procured by a 100% EOU under a valid CT-3 certificate and warehoused under Customs supervision were treated as eligible for the EOU exemption regime when they were put to use in export production. The Tribunal noted there was no finding of diversion or non-use, and that subsequent approval by the Development Commissioner reinforced the assessee's position. It applied the principle that duty on warehoused EOU goods cannot be demanded before debonding or removal from the bonded warehouse, and that the Cenvat Credit Rules definition of capital goods does not control the scope of an exemption notification intended for EOUs; the expression must be understood in common parlance.

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Issues: Whether duty demand on goods procured by a 100% EOU under a valid CT-3 certificate and covered by Notification No. 22/03-C.E. was sustainable before debonding or removal from the bonded warehouse.

Analysis: The goods were procured under a valid CT-3 certificate issued after verification, warehoused under Customs supervision, and found to have been put to use in the EOU. There was no finding of diversion or non-use. The subsequent approval by the Development Commissioner also supported the assessee's case. The Tribunal applied the settled principle that, for warehoused goods of an EOU, duty cannot be demanded before debonding, and that the definition of capital goods in the Cenvat Credit Rules is not to be imported into an exemption notification meant for 100% EOUs; the term must be understood in common parlance.

Conclusion: The duty demand was premature and unsustainable. The appeal was allowed and the impugned order was set aside.

Ratio Decidendi: Where EOU goods are procured under a valid CT-3 certificate and accepted into bonded warehousing for use in export production, duty under the exemption regime cannot be demanded before debonding, and the Cenvat Credit Rules definition of capital goods does not control the scope of the EOU exemption notification.

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