EOU status continues until competent authority approves debonding, and first DTA clearance does not end it

A 100% Export Oriented Unit does not lose EOU status merely because it makes an initial clearance into the Domestic Tariff Area; conversion depends on approval by the competent authority and fulfilment of prescribed conditions. The Ministry of Industry's communications showed that debonding had been approved only in principle and remained conditional, including payment of duty as determined by Customs. Customs authorities could not confer or withdraw EOU status, since that function rested with the Ministry. On those facts, the relevant conversion date was not the first DTA clearance, and the Revenue's challenge failed.

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Issues: Whether the respondent's unit ceased to be a 100% Export Oriented Unit on the first clearance into the Domestic Tariff Area, or only when the competent authority finally approved conversion and removal of EOU status.

Analysis: The communications from the Ministry of Industry showed that the respondent's request for debonding was only approved in principle and remained subject to fulfilment of conditions, including payment of full duty as determined by Customs. The correspondence also showed that, even on the later dates relied upon by the parties, the competent authority continued to treat the unit as a 100% EOU because the prescribed conditions for conversion had not been fulfilled. Customs authorities had no power to remove or confer EOU status; that power rested with the Ministry of Industry. A first permissible clearance into the Domestic Tariff Area did not by itself terminate EOU status.

Conclusion: The unit did not cease to be a 100% EOU on the first DTA clearance, and the relevant date for conversion was not the date asserted by Revenue. The Revenue appeal failed.

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