Granite classification and EOU transfer compliance require fresh factual verification before exemption or duty liability is denied.

Granite clearances required fresh classification on the basis of actual processing: roughly cut or trimmed blocks may fall under Chapter 25, while polished, sized or otherwise processed dimensional granite may fall under Chapter 68. The transfer of duty-free inputs to another 100% EOU was treated as a procedural irregularity, but denial of exemption or duty relief could not rest on that lapse alone where post facto approval existed and substantive use, NFE achievement and accountal of the quantity still required verification. The matter was remanded for fresh examination of classification, duty liability, notification entitlement and related penalties.

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Issues: (i) Whether the clearances made by the appellant in DTA were classifiable under Chapter 25 as claimed, or under Chapter 68 as confirmed in the adjudication order; (ii) Whether the clearances from the appellant's unit to another 100% EOU could be treated as a mere procedural breach so as to deny duty relief and notification benefits.

Issue (i): Whether the clearances made by the appellant in DTA were classifiable under Chapter 25 as claimed, or under Chapter 68 as confirmed in the adjudication order.

Analysis: The classification depended on the nature and extent of processing carried out on the granite. If the goods were only roughly cut or trimmed blocks, they could remain within Chapter 25. If, on the other hand, the goods were polished, sized, or otherwise processed into dimensional cut and dressed granite, Chapter 68 could apply. The factual manner of clearance and the nature of the goods therefore required fresh examination on evidence.

Conclusion: The classification issue was not finally decided and had to be redetermined by the adjudicating authority.

Issue (ii): Whether the clearances from the appellant's unit to another 100% EOU could be treated as a mere procedural breach so as to deny duty relief and notification benefits.

Analysis: The transfer to the sister EOU was treated as a procedural irregularity because prior approval had not been taken, but post facto approval had been obtained and there was no allegation that the duty-free inputs were not used in the appellant's unit or that NFE was not achieved. The only unresolved factual aspect was whether the entire quantity had been duly accounted for by the recipient EOU, which required verification. In that context, denial of the notification benefit solely on the procedural lapse was not justified without further factual satisfaction.

Conclusion: The clearance to the sister EOU could not, by itself, sustain the demand, but the factual accountal of quantity had to be verified afresh.

Final Conclusion: The impugned order was set aside and the matter was remanded for fresh adjudication on classification, duty liability, notification entitlement, and related penalties after examination of the supporting evidence.

Ratio Decidendi: A procedural lapse in EOU clearances does not by itself justify denial of exemption or duty demand where post facto approval exists and substantive compliance remains to be verified; classification must be determined from the actual nature of processing applied to the goods.

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