Export obligation ought to be completed by EOU even if goods were first sent to another unit and from that another unit the export was effected

CA Bimal Jain

In the instant case, Bhimli Unit of Alsa Marine And Harvests Ltd. (the Respondent) is a 100 % Export Oriented Undertaking (EOU) engaged in the process of freezing and export of marine products as per the permission accorded

by the Department of Industrial Development. The Respondent imported goods without payment of Customs duty and procured indigenous goods without payment of Central Excise duty seeking exemption under Notification No. 13/81 dated February 9, 1981 and Notification No. 123/81 dated June 2, 1981 respectively. Departmental investigation revealed that during 1994-1996 the Respondent cleared goods with total value of Rs. 43,47,97,371/- to their Chennai Unit for further exporting. Accordingly, it was alleged that the Respondent have cleared the goods to the Domestic Tariff Area (“DTA”) on which duty of Rs. 4,34,79,737/- was payable. Accordingly SCN dated December 12, 1997 was issued which was further confirmed by the Ld. Commissioner.

Being aggrieved, the Respondent preferred an appeal before the Hon’ble Tribunal, where the appeal was allowed in favour of the Respondent and interalia it was held that since Chapter V-A of the erstwhile Central Excise Rules, 1944 applies to removal from an EOU unit, hence confiscation and penalty under erstwhile Rule 173Q thereof is set aside. Further, the goods manufactured and removed from the EOU have been admittedly exported out of India and therefore, there cannot be any duty leviable under the Customs Act and /or the Excise Act. Being aggrieved the Department preferred an appeal before the Hon’ble Supreme Court.

The Hon’ble Supreme Court held as under:

• The Notification (General Exemption No. 127) (“the Notification”) stipulate only 3 conditions namely the importer has been granted necessary licence for the import of the goods for the said purpose; importer carries out the manufacturing operation in the Customs Bond apart from the other conditions if any specified by the Assistant Collector of Customs and the importer exports out of India 100% or such other percentage, as may be fixed by the Board, of Articles manufactured wholly or partly from the goods for the period stipulated by the Board or extended period if any;
• The Respondent had fulfilled its legal obligation of exporting the manufactured goods in terms of the Notification;
• Exemption under the Notification cannot be denied on the premise that the unit at Bhimli (Visakhapatnam) which was given the status of EOU has not fulfilled export obligation, rather goods were sent to Chennai unit and it is from Chennai unit that the export was effected;
• Export done from Bhimli (Visakhapatnam) or Chennai unit, would be totally irrelevant and immaterial.

Thus, the Hon’ble Supreme Court allowed the appeal in favour of the Respondent and held that the Respondent, which is an EOU, had fulfilled its legal obligation of exporting the manufactured goods.

(Bimal Jain, FCA, FCS, LLB, B.Com (Hons), Mobile: +91 9810604563, Email: bimaljain@hotmail.com)

Click Read Other Articles from CA Bimal Jain