Export obligation under an EOU scheme cannot be undermined by parallel customs findings or missing shipping-bill references.

Customs authorities could not sustain duty demand, confiscation or penalties on an alleged failure to fulfil export obligation where the competent export authority was already examining the same export performance; the Tribunal held that customs could not proceed on parallel findings and set aside the adverse action. It also held that supplies routed through eligible export houses or star trading houses remained exports for discharge of export obligation, even if the EOU's name did not appear in shipping bills, because there was no evidence of domestic consumption. On both issues, the findings against the assessee were rejected and full relief followed.

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Issues: (i) Whether the customs authorities could sustain duty demand, confiscation and penalties on the premise that the 100% EOU had failed to fulfil its export obligation while the competent export authority was separately examining and accepting the export performance. (ii) Whether supplies routed through eligible export houses, with the appellant's name not reflected in shipping bills, could still be treated as exports for discharge of export obligation and not as domestic tariff area sales.

Issue (i): Whether the customs authorities could sustain duty demand, confiscation and penalties on the premise that the 100% EOU had failed to fulfil its export obligation while the competent export authority was separately examining and accepting the export performance.

Analysis: Export obligation under the EOU scheme is governed by the permission and undertaking given to the export authorities. Where the Development Commissioner and DGFT machinery were already seized of the same question and had initiated proceedings on export performance, the customs authorities could not, on the same issue, reach a contrary conclusion and proceed on parallel lines. The Tribunal also found the impugned order internally inconsistent, as it simultaneously declined to confirm duty on the imported capital goods yet confiscated the same goods. In the absence of a lawful foundation from the competent export authority that the unit had failed to function as an EOU, the customs demand and connected penal action could not stand.

Conclusion: The finding of failure to fulfil export obligation was not sustainable and was set aside in favour of the assessee.

Issue (ii): Whether supplies routed through eligible export houses, with the appellant's name not reflected in shipping bills, could still be treated as exports for discharge of export obligation and not as domestic tariff area sales.

Analysis: The record showed that the goods were moved to bonded export facilities and exported through parties who were eligible export houses or star trading houses. There was no evidence of actual domestic consumption, and the mere omission of the appellant's name from shipping bills was not enough to deny export character. The Tribunal treated the export modality as secondary to the substantive fact that the duty-free inputs had been used for export production and that the competent authority had accepted the export performance.

Conclusion: The supplies were accepted as exports for discharge of export obligation, and the contrary finding of domestic sale was set aside in favour of the assessee.

Final Conclusion: The duty demands, confiscations and penalties were unsustainable, and the appellant was granted full relief.

Ratio Decidendi: Where export obligation is governed by the competent export authority, customs authorities should not independently adjudicate failure of such obligation on the same facts, and exports routed through eligible export houses do not cease to be exports merely because the EOU's name is absent from shipping bills.

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