Premature duty demand on EOU capital goods shifted within bonded premises was unsustainable before de-bonding

Duty could not be demanded on capital goods imported under the 100% EOU scheme merely because they were shifted within approved bonded premises and were not immediately operational. The record showed the machines had been used earlier, remained within the bonded area, and the explanation that they were under repair was not displaced. In this setting, the scheme treated duty liability as arising at the stage of de-bonding, so a demand raised before that stage was premature and unsustainable. Consequential relief followed.

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Issues: Whether duty could be demanded on capital goods imported by a 100% Export Oriented Unit and shifted within approved bonded premises when the goods had earlier been used and were stated to be under repair, and whether such demand was premature before de-bonding.

Analysis: The capital goods were imported under Notification No. 52/2003-Cus. for use in the 100% EOU scheme and had already been used for about four years before being shifted to approved additional premises. The record showed that the machines were not removed outside the bonded premises and the explanation that they were under repair could not be rejected. The unit had also achieved substantial export performance. In these circumstances, duty on the 21 capital goods could not be fastened merely because they were not immediately operational in the shifted premises, and the scheme contemplated duty liability at the stage of de-bonding.

Conclusion: The demand of duty was held to be premature and unsustainable, and the appeal was allowed with consequential relief.

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