Destruction of obsolete EOU goods can proceed without duty on original import value when policy and exemption rules permit it.

Obsolete imported raw materials and components held by an EOU could be destroyed after intimation to, or permission from, Customs authorities under the governing policy and exemption framework, which covered destruction of goods and scrap without insisting on re-export. Where the goods were shown to be unfit for manufacture and the unit sought destruction with duty on scrap value, a demand based on the original import value was not sustainable. The amended exemption notification and Board circulars supported destruction or DTA clearance in such cases, and the duty demand founded on the original assessable value was set aside.

---

---

Issues: Whether obsolete imported raw materials and components procured duty-free by an EOU could be destroyed without payment of customs duty; and whether duty could be demanded on the original import value instead of the scrap or residual value.

Analysis: The applicable policy and exemption framework permitted destruction of capital goods, raw materials, consumables, spares, manufactured goods, scrap, waste, remnants and rejects within the unit after intimation to Customs authorities, or outside the unit with permission of Customs authorities. The subsequent amendment to the exemption notification brought it in line with the Foreign Trade Policy, reinforcing that no duty was payable on destruction. Board circulars dealing with defective, damaged or otherwise unfit goods also contemplated destruction, or clearance into DTA on payment of duty, rather than insistence on re-export. The materials on record showed that the goods had become obsolete and unfit for manufacture, and the appellant had sought permission to destroy them and discharge duty on the scrap value. The demand based on the original import value was therefore not sustainable.

Conclusion: The request for destruction could not be rejected on the footing that customs duty was payable on the original assessable value; the appellant was entitled to destruction without such insistence, and the appeal succeeded.

Final Conclusion: The impugned orders were set aside and the appellant obtained relief against the duty demand founded on the original import value of the obsolete goods.

Ratio Decidendi: Where the governing policy and exemption notification permit destruction of obsolete or unfit EOU goods after intimation or permission of Customs, duty cannot be insisted upon on the original import value merely because the goods are no longer fit for use.

---