De-bonding from EOU status fixes the post-exit duty regime once liabilities are discharged, despite delayed no dues certification.
Where a 100% Export Oriented Unit is permitted to de-bond from a specified date and has discharged the assessed liabilities, its post-exit clearances are governed by the normal domestic fiscal regime rather than the EOU regime. The formal no dues certificate does not keep the unit in EOU status if the competent authority has already accepted exit with effect from that date, especially where delay in issuing the certificate is attributable to the department. On that basis, the customs-equivalent duty demand and connected penalty were held unsustainable, and consequential relief followed.
Issues: (i) Whether the appellant ceased to be a 100% Export Oriented Unit from 30.03.2005 on completion of the de-bonding formalities and was therefore liable only to pay normal central excise duty on subsequent clearances; (ii) whether the demand for the aggregate of customs duties and the penalty could be sustained when the competent authorities accepted the exit from the EOU scheme with effect from 30.03.2005 and the delay in issuing the no dues certificate was attributable to the department.
Issue (i): Whether the appellant ceased to be a 100% Export Oriented Unit from 30.03.2005 on completion of the de-bonding formalities and was therefore liable only to pay normal central excise duty on subsequent clearances.
Analysis: The relevant policy framework permitted exit from the EOU scheme on in-principle approval, followed by assessment of duty and issue of the no dues certificate. The competent development authority ultimately recognized that the unit had discharged its liabilities by 30.03.2005 and allowed exit from the EOU scheme from that date. The departmental assessment and the appellant's payment of the assessed duty and execution of the required bond and bank guarantee also supported the position that the conversion had crystallized from 30.03.2005.
Conclusion: The appellant ceased to be a 100% EOU with effect from 30.03.2005 and, from 01.04.2005 onwards, the clearances were liable to normal central excise duty as a DTA unit under the EPCG scheme.
Issue (ii): Whether the demand for the aggregate of customs duties and the penalty could be sustained when the competent authorities accepted the exit from the EOU scheme with effect from 30.03.2005 and the delay in issuing the no dues certificate was attributable to the department.
Analysis: Once the competent authority had accepted de-bonding from 30.03.2005 and the appellant had already discharged the assessed duty liabilities, the department could not treat the unit as continuing in the EOU regime merely because the formal no dues certificate was issued belatedly. The delay in issuing the certificate was held to be attributable to the department, and the appellant had continued to pursue the authorities throughout the intervening period. In these circumstances, the higher demand based on EOU status and the connected penalty could not stand.
Conclusion: The demand for customs-equivalent duties and the penalty were unsustainable.
Final Conclusion: The appeal succeeded, the duty demand and penalty were set aside, and the appellant was held entitled to consequential relief under law.
Ratio Decidendi: Where the competent authority permits de-bonding from a 100% EOU with effect from a specified date and the unit has discharged the assessed liabilities, subsequent clearances are governed by the post-exit fiscal regime notwithstanding departmental delay in issuing the formal no dues certificate.
TaxTMI 
AI Drafter ✕
TaxTMI 
