EOU DTA clearances and declared valuation upheld where exemption conditions were treated as directory and undervaluation was unproved.

A supervised EOU making DTA clearances was found entitled to basic customs duty exemption under the relevant notification, because the clearances were made under the EOU regime, export obligation was complied with, and no admissible evidence showed that the granite slabs were manufactured from imported blocks; the intimation condition to the proper officer was treated as directory in that context. The separate demand based on alleged undervaluation also failed, as the goods were assessed by the proper customs officer, duty was paid on declared invoice values, ER-2 returns were filed, and the Department did not establish a reliable comparable basis or sufficient evidence to reject the declared value. The impugned orders were set aside.

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Issues: (i) Whether the appellant, a 100% EOU, was entitled to exemption from basic customs duty on DTA clearances under the relevant exemption notification. (ii) Whether the demand based on alleged undervaluation of granite slabs cleared to DTA was sustainable.

Issue (i): Whether the appellant, a 100% EOU, was entitled to exemption from basic customs duty on DTA clearances under the relevant exemption notification.

Analysis: The appellant established that the DTA clearances were made under the EOU regime, that marble clearances were supported by the directions of the Supreme Court and the Development Commissioner, and that the Department produced no admissible evidence to show that the granite slabs cleared to DTA were manufactured from imported granite blocks. The condition requiring intimation to the proper officer was treated as directory in the context of supervised DTA clearances by the EOU authorities. The appellant was also found to have complied with export obligation, and the benefit of the exemption notification was held available.

Conclusion: The appellant was entitled to the exemption, and the demand of basic customs duty was unsustainable.

Issue (ii): Whether the demand based on alleged undervaluation of granite slabs cleared to DTA was sustainable.

Analysis: The clearances were assessed by the proper customs officer, duty was paid on the declared invoice value, and ER-2 returns were regularly filed. The Department relied on contemporaneous import data and residual valuation, but did not establish a reliable comparison between the appellant's DTA clearances and the alleged comparable imports. The record also showed that the related unit's purchases from the appellant formed only a small part of its turnover, and the evidence was insufficient to reject the declared value.

Conclusion: The allegation of undervaluation was not proved and the valuation-based demand failed.

Final Conclusion: The impugned orders were set aside and the appeals succeeded with consequential relief under law.

Ratio Decidendi: In a supervised EOU DTA-clearance regime, a procedural intimation condition in a beneficial exemption cannot be treated as mandatory in the absence of contrary evidence, and a demand based on undervaluation cannot stand without admissible evidence establishing rejection of the declared value and a proper comparative basis.

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