2008 (10) TMI 209 - AT - Customs

100% EOU - the vehicles used for clearance and transportation of the slabs for export were involved in road accidents and, consequently, the granite slaps were damaged. Under intimation to the department, the appellants abandoned the goods after breaking the slabs into smaller pieces. Subsequently, they raised insurance claim. After more than 2 years, the department issued a show-cause notice for recovery of duty of Rs. 2,61,338/- on the aforesaid clearances - Admittedly, in the present case, the granite slabs cleared by the EOU never reached the DTA. They eventually ended up as scrap , which was abandoned. Thus the appellants could legitimately claim the benefit of the Notification. benefit of notification available demand is not sustainable.

Summary

Issues:
1. Duty recovery on damaged granite slabs cleared by a 100% Export-Oriented Unit (EOU) due to road accidents.
2. Enforcement of bond executed by the EOU for export default.
3. Applicability of Notification No. 24/2003-C.E. dated 31-3-2003 on duty exemption for excisable goods produced in an EOU.

Analysis:
1. The judgment dealt with the issue of duty recovery on damaged granite slabs cleared by an EOU during road accidents. The appellants, engaged in the manufacture and export of polished granite slabs, faced a demand for duty of Rs. 2,61,338 on clearances where the slabs were damaged in transit. The department issued a show-cause notice after more than 2 1/2 years, which was contested. The original authority confirmed the duty demand, upheld by the appellate authority. However, the Member (J) noted that the damaged slabs were abandoned after accidents, and the intended export did not happen due to circumstances beyond control. The insurance claim further supported the nature of the transactions, leading to the conclusion that the bond was not enforceable due to no wilful default in export.

2. The judgment addressed the enforcement of the bond executed by the EOU for export default. The EOU was bound to export goods and pay duty in case of default as per the bond terms. However, since the intended export did not occur due to road accidents, which were uncontrollable, there was no default on the part of the appellants. The absence of wilful default meant the bond could not be enforced against them, resulting in the duty demand not being warranted.

3. The judgment also analyzed the applicability of Notification No. 24/2003-C.E. dated 31-3-2003 on duty exemption for excisable goods produced in an EOU. This notification exempted excisable goods produced in an EOU from duty payment, except if brought to any other place in India. As the damaged granite slabs cleared by the EOU never reached the Domestic Tariff Area (DTA) and were eventually abandoned as scrap, the appellants were eligible to claim the benefit of the notification. The judgment highlighted that the appeal was only liable to be allowed based on these grounds.

In conclusion, the judgment set aside the impugned order, allowing the appeal and disposing of the stay application. The decision was based on the lack of default in export, the benefit of the duty exemption notification, and the unique circumstances of the case compared to precedent cases.