EOU leasing exemption and extended limitation turn on disclosed facts, lawful consideration, and absence of suppression.

An EOU leasing arrangement for imported capital goods was examined for eligibility under Notification No. 52/2003-Cus, with the analysis accepting that joint filing and bond execution requirements could not defeat the exemption where their absence was explained by EDI constraints, consideration existed in law under the Contract Act, and the machines were received and used by the EOU. The discussion also records that the lease agreement and import documents had already been furnished to the department, so no suppression of facts was established and the extended limitation period for the show cause notice was not justified. On that basis, the exemption benefit and consequential relief were treated as sustainable, while demand and penalties were not.

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Issues: (i) whether the impugned goods were entitled to the benefit of Notification No. 52/2003-Cus; (ii) whether invocation of the extended period for issuance of show cause notice was justified.

Issue (i): whether the impugned goods were entitled to the benefit of Notification No. 52/2003-Cus.

Analysis: The relevant policy and circular permitted an EOU to source capital goods through a leasing arrangement, but the requirement of joint filing of import documents and joint execution of the bond was examined in the factual context. The absence of joint filing was explained as an EDI constraint. On the question of the lease arrangement, the existence of consideration was assessed with reference to Section 2(d) of the Indian Contract Act, 1872, and it was held that adequacy of consideration is immaterial. The arrangement could not be rejected merely because the parties also had a job-worker and principal-manufacturer relationship. The imported machines were received and put to use by the EOU, and denial of the exemption in entirety was found to be unwarranted.

Conclusion: The goods were held to be eligible for the notification benefit, and total denial of exemption was not sustainable.

Issue (ii): whether invocation of the extended period for issuance of show cause notice was justified.

Analysis: The lease agreement and connected import and warehousing documents had already been furnished to the department during the import and bonding process. No hidden material was unearthed through investigation, and the department was aware of the relevant facts. In these circumstances, suppression of facts was not established, and the factual basis for invoking the longer limitation period was absent.

Conclusion: Invocation of the extended period was held to be unjustified.

Final Conclusion: The demand and penalties could not be sustained, and the assessee was held entitled to the benefit of the exemption with consequential relief in accordance with law.

Ratio Decidendi: When the material facts are already disclosed to the department and the disputed arrangement is supported by consideration in law, exemption benefit cannot be denied on a purely technical breach, nor can the extended limitation period be invoked without suppression.

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