EOU input exemption upheld where substantive conditions were met despite DTA clearances and later-stage claim.

A 100% EOU/EHTP unit was entitled to claim separately available exemption under Notification No. 12/2012-Cus. and Notification No. 12/2012-CE for imported and indigenous inputs used in manufacture, even though the finished mobile phone parts were cleared to the DTA at nil duty. The Tribunal held that EOU status did not by itself bar such concessional or nil-rate exemptions when the substantive conditions of those notifications were satisfied. It also accepted the claim despite being raised later, as the entitlement was substantive and the relevant procedure had been under departmental control. The customs duty, central excise duty, interest, and penalties were therefore not sustainable.

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Issues: Whether a 100% EOU/EHTP unit clearing parts and components of mobile phones to the domestic tariff area at nil duty could claim exemption under Notification No. 12/2012-Cus. and Notification No. 12/2012-CE, and whether the consequent demand of customs duty, central excise duty, interest, and penalty was sustainable.

Analysis: The impugned demand had proceeded on the basis of the EOU notifications and the view that, where finished goods cleared to DTA were non-excisable or assessable to nil duty, exemption on inputs was unavailable. The dispute, however, was whether the appellant could independently invoke the alternative exemption notifications applicable to the imported and indigenously procured inputs used for manufacture of the cleared goods. The Tribunal followed its earlier decision on the same issue and the administrative clarification that EOUs are eligible for other concessional or nil-rate exemptions where the substantive conditions of those notifications are fulfilled. It held that the benefit could not be denied merely because the unit was an EOU/EHTP, and that the benefit was available even though the claim was raised at a later stage, since the substantive entitlement existed and the procedure already under departmental control had been followed.

Conclusion: The exemption under Notification No. 12/2012-Cus. and Notification No. 12/2012-CE was admissible to the appellant, and the duty demand, interest, and penalties were not sustainable.

Final Conclusion: The appeal succeeded on merits and the impugned adjudication was set aside in full, including the consequential penalties.

Ratio Decidendi: An EOU/EHTP unit is not barred from claiming a separately available concessional or nil-duty exemption for inputs merely because its finished goods are cleared to DTA, provided the substantive conditions of that exemption are satisfied.

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