2017 (12) TMI 1453 - AT - Customs

100% EOU - non-fulfillment of export obligation - appellant were unable to procure the requisite foreign exchange in the initial period of LOP, fixed by the Development Commissioner - Held that - the Central Board of Excise and Customs vide its Circular No. 21/95-Cus., dated 10-3-1995 has clarified that the liability of customs duty on goods imported by 100% EOU arises either at the stage of the unit being debonded or if any of the conditions of customs notification stand violated or remain unfulfilled - Admittedly in the present case, the Development Commissioner has extended the EOU status of the appellant till 2019 and hence it is not only premature on the part of the adjudicating authority to confirm the demand but is also without any basis - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Duty liability of a 100% EOU for not fulfilling export obligations within the stipulated period.
2. Authority of customs to recover foregone duty without concurrence of Development Commissioner.
3. Validity of the impugned order in the absence of a determination by the Development Commissioner regarding non-fulfillment of export obligations.

Analysis:

1. The appellant, a 100% EOU, procured capital goods and raw materials duty-free for manufacturing products for export. Due to difficulties in meeting foreign exchange requirements within the designated period, proceedings were initiated against them for duty confirmation. The adjudicating authority found the appellant liable for duty as export obligations were not fulfilled within five years of commercial production. However, the Development Commissioner extended the appellant's EOU status until 2019, indicating ongoing compliance with export obligations.

2. The Tribunal referenced a prior case to highlight that customs cannot initiate recovery proceedings without the Development Commissioner's concurrence, especially when goods are still in use and not removed clandestinely. A circular clarified that customs duty liability arises upon debonding or violation of customs notification conditions. The authority to determine non-fulfillment of export obligations rests with the Development Commissioner, allowing duty recovery only after such determination.

3. The Tribunal concluded that the impugned order lacked basis as the Development Commissioner had extended the appellant's EOU status. Confirming the demand prematurely was deemed unjustified. The order was set aside, granting the appeal with consequential relief. However, if the Development Commissioner later determines non-fulfillment of export obligations, the Revenue can initiate proceedings based on new facts and cause of action. The appeal was disposed of with this clarification.