Duty-free destruction of obsolete EOU goods permitted under policy and aligned customs exemptions, with remand on unadjudicated issue.

Foreign trade policy and customs exemption provisions were analysed on destruction of obsolete raw materials, components, capital goods and scrap in an EOU. The text states that the framework permitted destruction of obsolete or unfit goods within the unit, or outside it with Customs permission, without duty, and that a later amendment aligned the exemption notification with the policy. Prior departmental permissions and an earlier Tribunal ruling in the assessee's own matter were treated as supporting this position. Where a related challenge had not been examined on merits and arose from a preliminary rejection, remand for fresh adjudication was considered appropriate.

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Issues: (i) Whether obsolete raw materials, components, capital goods and scrap could be destroyed or disposed of without payment of duty under the Foreign Trade Policy and the applicable customs exemption notifications. (ii) Whether the appeal against the Commissioner (Appeals) order rejecting the challenge as premature required remand for fresh adjudication.

Issue (i): Whether obsolete raw materials, components, capital goods and scrap could be destroyed or disposed of without payment of duty under the Foreign Trade Policy and the applicable customs exemption notifications.

Analysis: The governing policy and exemption framework permitted destruction of obsolete or unfit goods within the unit, or outside the unit with permission of the Customs authorities, without levy of duty. The subsequent amendment to the exemption notification brought it in parity with the policy and supported the same treatment for destruction of obsolete goods. The earlier departmental permissions and the Tribunal's own prior decision in the assessee's case reinforced the view that destruction of such goods could not be denied merely because they had become obsolete or unfit for manufacture.

Conclusion: The issue was decided in favour of the assessee and destruction of the obsolete goods could not be denied on the ground of duty liability.

Issue (ii): Whether the appeal against the Commissioner (Appeals) order rejecting the challenge as premature required remand for fresh adjudication.

Analysis: The impugned appeal arose from a letter and the lower appellate authority had not examined the dispute on merits. Since the matter had not been adjudicated substantively and the controversy was already resolved in the assessee's favour on the connected appeals, the proper course was to send the matter back for decision afresh by the adjudicating authority.

Conclusion: The matter was remanded for fresh adjudication.

Final Conclusion: The connected appeals on the substantive destruction issue were allowed, and the remaining appeal was sent back for fresh consideration, leaving the assessee substantially successful.

Ratio Decidendi: Obsolete or unfit EOU goods may be destroyed without duty where the applicable policy and exemption notification so permit, and a later clarificatory amendment aligning the notification with the policy supports such treatment; where the lower authority has not decided the merits, remand is appropriate.

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