2014 (7) TMI 455 - HC - Customs

100% EOU - benefit of the DTA Scheme - debonding - conversion of free shipping bills into Advance Licence/DEPB/DFRC shipping bills - revenue submitted that, while transcending from EOU regime to that of the DTA, the Revenue had no occasion to verify whether in fact the inputs in respect of which draw-back is sought to be claimed after amendment were in fact used. - Tribunal allowed the benefit - Held that - the verification which preceded issue of no objection certificate and the final debonding order was with respect to the benefits that could have been availed by the assessee as an EOU Unit. At that stage, the authorities had no occasion to verify whether inputs had been sourced in a proper manner as to entitle the draw back or any other benefit that a DTA unit could legitimately claim. In that sense, the ruling of this court in M/s Terra Films (2011 (4) TMI 13 - DELHI HIGH COURT) is decisive on the point. This Court is of the opinion that consequently the appeal has to succeed. Since the documents and materials which were apparently available when the exports were made, to substantiate the assessee s claim for DTA benefits have concededly not been gone into, it would be appropriate that this aspect be duly considered by the Tribunal. - matter remanded back to CESTAT - Decided in favor of assessee.

Summary

Issues:
1. Interpretation of the DTA Scheme entitlement for an assessee transitioning from an EOU to a DTA unit.

Analysis:
The judgment addresses the issue of whether the Tribunal erred in granting the respondent/assessee the benefit of the Domestic Tariff Area (DTA) Scheme during its transition from an Export Oriented Unit (EOU) to a DTA unit. The respondent applied for a no objection certificate to convert into a DTA unit, claiming no tax liability. Subsequently, the Revenue granted the certificate and debonding took place. The respondent then sought to amend shipping bills for claiming DTA Scheme benefits, which the Revenue rejected based on a circular prohibiting such conversions unless benefits were denied due to a dispute. The Tribunal, however, allowed the appeal, citing the Foreign Trade Policy. The Revenue contended that verification of inputs for draw-back claims was necessary during the transition, relying on a previous court ruling. The circular highlighted the restrictions on converting shipping bills and conditions for scheme conversion.

The judgment delves into the Tribunal's reliance on the Foreign Trade Policy's procedural requirements for debonding an EOU unit. It notes the Tribunal's assumption that the Revenue verified the exports during debonding, thus justifying the benefit claim under the DTA Scheme. However, the court finds this reasoning flawed, citing a previous case where verification of documents and goods for scheme benefits was deemed necessary. The court emphasizes that the verification preceding debonding was related to EOU benefits, not DTA entitlements, necessitating a thorough examination of documents for DTA claims. The court sets aside the Tribunal's decision, remitting the matter for reconsideration with a focus on verifying materials supporting the DTA benefits claim.

In conclusion, the court allows the appeal without costs, emphasizing the need for a detailed examination of materials supporting the DTA benefits claim during the transition from EOU to DTA. The judgment clarifies the distinction between verification for EOU benefits and the requisite scrutiny for DTA entitlements, highlighting the importance of thorough document examination for scheme claims during such transitions.