Duty demand against a 100% EOU is premature until de-bonding is ordered by the competent authority.

A demand of duty and related penalties against a 100% Export Oriented Unit was treated as premature because the competent authority had not ordered de-bonding and the Development Commissioner had extended the unit's EOU status. In the absence of de-bonding, and with no allegation of clandestine removal into the domestic tariff area, the proceedings could not be sustained at that stage. The note applies Board circulars and earlier Tribunal reasoning to state that duty liability should be examined only after de-bonding is ordered by the competent authority, with the matter remitted for fresh consideration at that point.

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Issues: Whether the demand of duty and confirmation of penalties against a 100% Export Oriented Unit was premature when the Development Commissioner had not ordered de-bonding and had extended the EOU status.

Analysis: The validity of the demand depended on the legal status of the unit. The authority competent to order de-bonding had not taken any such step, and the record showed that the Development Commissioner had extended the EOU status. In the absence of de-bonding, and there being no allegation of clandestine removal into the domestic tariff area, the demand was considered premature. The Board circulars and the earlier Tribunal decision were applied to hold that proceedings could not be sustained at that stage.

Conclusion: The demand and consequential confirmation were set aside and the matter was remanded for de novo consideration when de-bonding is ordered by the competent authority.

Ratio Decidendi: A demand against a 100% Export Oriented Unit is premature until the competent authority orders de-bonding, and proceedings for duty liability must await that event.

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