Duty-free transfer of inputs to an export-oriented unit upheld where documentation and export-use accounting were maintained.

Duty-free removal of inputs from a domestic tariff area unit to a 100% export-oriented unit under CT-3 documentation was treated as permissible where the recipient unit accounted for the goods and used them for authorised export production. The analysis notes that such transfer was considered substantively analogous to export without payment of duty, so denial of credit was not justified on the documented facts. As a result, the duty demand and equal penalty were set aside, and the impugned order was annulled in favour of the assessee.

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Issues: Whether inputs on which credit had been taken could be cleared from the domestic tariff area unit to a 100% export-oriented unit under CT-3 certificate without payment of duty and whether the resulting duty demand and equal penalty were sustainable.

Analysis: The clearance was treated as permissible because inputs on which credit had been taken could be removed as such on payment of duty or exported without payment of duty, and a transfer to another export-oriented unit under proper CT-3 documentation was considered analogous in substance. The receiving unit was required to account for the duty-free inputs and use them in the prescribed manner for export production. Since the same Superintendent controlled both units and the transfers were documented, denial of credit and confirmation of duty demand and penalty were not justified.

Conclusion: The duty demand and penalty were set aside and the issue was decided in favour of the assessee.

Final Conclusion: The impugned order was annulled and the appeal succeeded with consequential relief to the appellants.

Ratio Decidendi: Duty-free clearance of duly documented inputs to a 100% export-oriented unit cannot be denied where the recipient unit accounts for and uses the inputs for authorised export production.

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