Conditional EOU exemption requires issue-wise scrutiny; later NFE regularisation does not cure unverified duty-free goods breaches.

Conditional exemption under 100% EOU notifications requires separate verification of receipt, storage, utilisation, accountal, movement and positive NFE compliance; later regularisation of NFE does not by itself cure alleged breaches relating to non-accountal, non-intimation or unauthorised removal of duty-free goods. Because the appellate authority had considered only limited aspects and the wider objections needed independent examination on evidence, the matter was sent back for fresh consideration of all relevant conditions under both notifications.

---

---

Issues: (i) Whether the respondent had complied with the conditions of the exemption notifications relating to 100% EOU imports and indigenous procurements, including receipt, storage, utilization and achievement of positive NFE. (ii) Whether the Commissioner (Appeals) had to independently examine all alleged breaches before deciding the Department's appeal, and whether the matter required remand.

Issue (i): Whether the respondent had complied with the conditions of the exemption notifications relating to 100% EOU imports and indigenous procurements, including receipt, storage, utilization and achievement of positive NFE.

Analysis: The notifications were treated as conditional exemption provisions requiring proper accountal of goods, observance of warehousing requirements, compliance with intimations relating to production and movement of goods, and achievement of positive NFE. The later regularisation of NFE by the competent authority did not by itself answer the separate allegations of non-accountal, non-intimation, and possible unauthorised removal of duty-free goods. The record indicated that several factual aspects concerning the imported and indigenously procured goods had not been fully explained or verified.

Conclusion: The conditions of the exemption notifications were not shown to have been fully complied with, and the issue remained open for fresh examination.

Issue (ii): Whether the Commissioner (Appeals) had to independently examine all alleged breaches before deciding the Department's appeal, and whether the matter required remand.

Analysis: The appellate order was found to have dealt only with limited aspects, while the Department had raised wider objections concerning non-installation of capital goods, non-use of duty-free materials, non-accountal, and other breaches of the notification conditions. Since these factual and legal issues required independent consideration on the evidence, the order under challenge could not stand without fuller adjudication. In the interest of justice, the matter was required to be sent back for reconsideration of all relevant conditions under both notifications.

Conclusion: The matter was remanded for fresh decision by the Commissioner (Appeals).

Final Conclusion: The Department succeeded in obtaining a remand, and the exemption compliance dispute was left for reconsideration on all relevant grounds.

Ratio Decidendi: Conditional exemption under EOU notifications must be examined issue-wise on all statutory and policy requirements, and later regularisation of one condition does not cure unverified breaches relating to accountal, movement, or removal of duty-free goods.

---