Temporary removal of EOU capital goods does not trigger duty demand when the goods are restored for continued use.

Capital goods procured for a 100% Export Oriented Unit under concessional exemption were temporarily removed by municipal authorities for recovery of dues and later restored to the unit. The duty demand was held unsustainable because the unit retained its EOU status, the loader remained intended for manufacturing use, and the temporary detention did not alter the exemption basis. On those facts, duty recovery could not be demanded merely because the goods were briefly unavailable and were subsequently returned for continued use in the unit.

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Issues: Whether duty demand was sustainable on a loader procured for a 100% Export Oriented Unit under Notification No. 1/95-C.E. when the loader had been removed by municipal authorities for recovery of dues and was later restored to the unit.

Analysis: The loader had been obtained for use in the 100% EOU under concessional duty exemption. The only interruption in its availability was its removal by the municipal authorities towards property tax dues, and it was subsequently returned to the unit after the dues were paid. The unit continued to hold 100% EOU status, and the loader remained required for the manufacturing activity for which it had been procured. On these facts, the temporary detention did not justify treating the exempted goods as liable to duty recovery.

Conclusion: The duty demand was not sustainable and the issue was decided in favour of the assessee.

Final Conclusion: The impugned order was set aside and the appeal was allowed with consequential relief.

Ratio Decidendi: Where capital goods procured for a 100% EOU under an exemption notification are only temporarily removed by a third party and are later restored for continued use in the unit, duty cannot be demanded merely on account of that temporary removal.

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