Destruction of finished goods by EOU within premises

[Dashrath Walkoli]

Sir we are 100% EOU. At the time of import of raw materials, we availed the exemption from BCD +SWS+IGST+ADD as per Notif 52/2003-Cus. Further, due to quality issues, certain finished goods manufactured from these duty-free inputs were found unfit for export and and now we intend the finished goods to be destroyed within the EOU premises after prior intimation to the jurisdictional Customs authorities.

In light of the above, we seek your expert opinion on the following:

1. Does the destruction of processed finished goods due to quality issue within the unit, after proper intimation, requires reversing the BCD +SWS+IGST+ADD initially exempted on the input raw materials as per Para 6.14(b) of FTP 2023 and Condition 8 of Notification 52/2003-Customs?
2. IGST Reversal: Since IGST was initially exempted (upfront) at the time of import under Section 3(7) of the Customs Tariff Act, rather than paid and claimed as Input Tax Credit (ITC), does Section 17(5)(h) of the CGST Act 2017 (blocked credit on destroyed goods) mandate a reversal or payment of this "saved" IGST?
3. Conflict of Law: Para 6.07(f) of the FTP states that the expression "no duties/taxes" for destroyed scrap/waste does not include taxes under GST laws. Does this same restriction apply to the destruction of the finished goods themselves, effectively requiring payment of the IGST component originally exempted on the inputs?

AI Summary

Duty exemption on destroyed EOU goods prevents reversal of import duties and IGST when destroyed under Customs supervision.
Destruction of finished goods within a 100% EOU after intimation and under Customs supervision does not amount to DTA clearance and therefore does not require reversal or payment of Basic Customs Duty, Social Welfare Surcharge, Additional Duty or IGST exempted on imported inputs; where IGST was exempted at import and no ITC was availed, the ITC-reversal rule for destroyed goods does not apply because there is no credit to reverse.