Customs duty on EOU to DTA removals requires proper statutory basis; denial of fair hearing justifies remand.

Customs duty on removals of cut flowers from a 100% Export Oriented Unit to the Domestic Tariff Area was not treated as properly sustainable on a customs footing, because the goods were grown and removed within India and any liability for DTA clearances had to be examined under the applicable excise framework. Procedural irregularities alone could not convert the transaction into a customs duty case. The matter was also remanded because the lower appellate proceedings were vitiated by denial of a proper hearing, with stay applications and appeals disposed of without due consideration and one matter rejected on pre-deposit without reasoned adjudication.

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Issues: (i) whether customs duty and penalty could be sustained on removals of cut flowers from a 100% Export Oriented Unit to the Domestic Tariff Area; (ii) whether the matter required remand because the lower appellate authority had not decided the appeals after proper consideration and hearing.

Issue (i): whether customs duty and penalty could be sustained on removals of cut flowers from a 100% Export Oriented Unit to the Domestic Tariff Area.

Analysis: The goods were grown and removed within India, and the levy invoked was under the Customs Act, whereas the liability for DTA clearances, if any, had to be examined under the Central Excise law and the applicable procedural framework. The reasoning also noted that procedural irregularities could not, by themselves, convert such removals into a customs duty liability. On that basis, the invocation of customs duty on the facts was not accepted as proper for final determination at that stage.

Conclusion: The demand was not finally upheld on the customs footing, and the matter required reconsideration according to law.

Issue (ii): whether the matter required remand because the lower appellate authority had not decided the appeals after proper consideration and hearing.

Analysis: The lower appellate proceedings suffered from a serious breach of natural justice, as the stay applications and appeals were disposed of without proper hearing in two matters and the third was rejected on pre-deposit without a reasoned determination. This procedural infirmity justified setting aside the orders and sending the matter back for fresh adjudication with liberty to place all relevant material before the authority.

Conclusion: The orders were set aside and the matter was remanded for de novo decision.

Final Conclusion: The dispute was restored to the jurisdictional authority for fresh determination of duty, if any, after following due process and hearing both sides.

Ratio Decidendi: Where the levy is sought on removals from an Export Oriented Unit, the proper statutory basis must be established and procedural defects cannot, by themselves, justify a customs duty demand; where the proceedings are vitiated by denial of a fair hearing, remand for fresh adjudication is warranted.

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