Excise duty on work in progress at EOU debonding is unsustainable absent a statutory or policy basis.

Excise duty cannot be demanded on semi-finished goods or work in progress lying in stock at the time of debonding of a 100% EOU, because duty attaches only to excisable goods that have come into existence in a final and marketable form. The exit policy for EOUs covered imported and indigenous capital goods, raw materials, components, consumables, spares and finished stock, but did not extend to in-process goods. Prior Tribunal decisions treating work in progress and semi-finished goods as outside the debonding levy were followed, and the demand was held unsustainable.

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Issues: Whether duty could be demanded on semi-finished goods or work in progress lying in stock at the time of debonding of a 100% EOU.

Analysis: The goods were found to be at different stages of manufacture and not in fully manufactured or marketable form. Excise duty is payable on excisable goods, and no duty can be demanded at an intermediate stage where no final excisable product has yet come into existence. The policy governing exit from the EOU scheme contemplated duty on imported and indigenous capital goods, raw materials, components, consumables, spares and finished goods in stock, but did not provide for duty on in-process goods. The issue was treated as settled by prior Tribunal decisions holding that no duty is payable on work in progress or semi-finished goods at the stage of debonding.

Conclusion: Duty was not payable on the semi-finished goods or work in progress at the time of debonding, and the demand was unsustainable.

Ratio Decidendi: In the absence of a statutory or policy basis for taxing in-process goods, excise duty cannot be demanded on semi-finished goods or work in progress lying in stock at the time of debonding of a 100% EOU.

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