Final exit from EOU scheme bars reopened customs demand absent fraud, collusion or suppression of facts.

Where a 100% EOU was permitted to shift to the EPCG scheme and was later granted final exit from the EOU scheme, customs duty demand, confiscation, redemption fine and penalty could not be sustained in the absence of fraud, collusion or suppression. The record showed that the department was aware of the NFE issue during the approval process, and the show cause notice was issued long after final exit. Once the competent authority approved the switch and granted final exit, Customs could not reopen the matter on the same facts by invoking the extended period without evidence of deliberate non-disclosure. The proceedings were therefore set aside in favour of the assessee.

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Issues: Whether the demand of customs and central excise duties, confiscation, redemption fine and penalty could be sustained after the competent authority had granted permission to switch from the 100% EOU scheme to the EPCG scheme and the unit had been given final exit from the EOU scheme, and whether the extended period could be invoked in the absence of suppression or fraud.

Analysis: The permission to switch over was first considered by the Development Commissioner, then objected to by Customs, thereafter recommended by the Development Commissioner, followed by NOC and permission by the Customs authorities, and finally final exit from the EOU scheme was granted. The record showed that the department was aware of the NFE issue before granting permission and that the later show cause notice was issued long after the final exit. In these circumstances, the proceedings could not be founded on suppression of facts. The final decision on the unit's permission lay with the competent authority, and once final exit was granted, Customs could not reopen the matter in the absence of fraud or collusion.

Conclusion: The demand, confiscation, redemption fine and penalty were unsustainable and were set aside in favour of the assessee.

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