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Issues: Whether the demand of duty, confiscation and penalties against a 100% EOU could be sustained when the Department had not first acted in accordance with the Board's circular requiring the matter to be examined by the Development Commissioner and a definite conclusion to be reached before confirmation of duty.
Analysis: The unit's alleged failure to install machinery and commence commercial production within time was examined against the scheme governing 100% EOUs and the departmental clarification in Circular No. 21/95-Cus. The Circular required the Customs authorities to inform the Development Commissioner where production did not commence or export obligation was not fulfilled, and stipulated that duty should be confirmed only after a definite conclusion by the Development Commissioner. Since the record did not show that the demand was confirmed after such a determination, the adjudication was held to be procedurally premature.
Conclusion: The demand, confiscation and penalties could not be sustained in the existing form and the original order was set aside with a remand for fresh adjudication after compliance with the Circular.
Ratio Decidendi: In proceedings against a 100% EOU, where the governing circular requires prior determination by the Development Commissioner, customs duty cannot be confirmed until that procedural safeguard is satisfied.
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