Per Shri V.K. Ashtana :

These are appeals from Order-in-Appeal of Commissioner of Customs (Appeals) dated 26.3.96, upholding the O-I-O No. S 23/54/92-Gr.7/S-30/221/95-Gr.7A dated 26.9.95 wherein a demand of Rs. 93,40,559/- under Section 28 (2) of Customs Act, 1962 was confirmed upon the appellant, which is an 100% Export Oriented Unit (EOU). The period in question is from 28.11.91 to 22.3.93.

2. Briefly, the facts of the case are that the appellants, as a 100% EOU, are, interalia, manufacturing "Wire-Wheels", an accessory for Motor Vehicles, and exporting them. As some of these were found defective/out of date, they were re-imported during the aforesaid period vide 16 Bills of Entry after executing separate Bonds in terms of Notification No. 132/61-Cus. As the appellants failed to re-export these goods within the stipulated time, the demand for above mentioned amount was confirmed in the O-I-O, which was also upheld by the impugned order-in-appeal.

3. Heard the Ld. Consultant Shri Kumaraswamy. He argued that in this 100% EOU, where bonded tenure expires only in 2005 AD, the wire-wheels are either exported by outright sale, or exported on stock transfer as per permission of RBI; that these get out of date very soon (due to change in car models etc.) and have then to be re-imported for incorporating changes, before they can be re-exported; that there is almost no demand for these in the country; therefore they cannot be sold as the prescribed percentage of rejects in the Domestic Tariff Area. It is therefore inevitable, he argued, that they may have to remain under bond for long periods.

4. He further argued that the simple bond executed by them on re-import of these goods was done as matter of expediency, though under law, such a bond was not necessary as they already had executed a composite bond under the 100% EOU scheme and on the advice of Customs Deptt.

5. He argued that there was a difference between the times of "Levy" & "Collection" of duty for Bonded goods in view of S15 CA/62. Since the `taxable event' arises only when they would be cleared out of the Bonded Warehouse, hence the demand as well as these bonds themselves are illegal. The Notification No. 132/61-Cus itself is inoperative in this case as the goods were coming into an 100% EOU. Therefore, the provisions of section 20 CA/62 shall be applicable only when the same "is sought for by the appellants".

6. Heard the Ld. JDR Shri Rama Rao. He argued that all 100% EOUs operated as customs Bonded Units and that at the material time no other law was available under the Customs Act 1962 to cover re-import of these exported goods except section 20 ibid and Notification No. 132/61-Cus. Therefore, these were applicable to 100% EOUs also. At this point, the Ld. SDR Shri R. Victor Thiagaraj argued that the specific provision for reimport of rejects with respect to the 100% EOU scheme was for the first time introduced specifically vide Notfn. No. 190/94-Cus dt. 6.12.94 (amending Notfn. 13/81-cus) wherein reimport within 3 years period for repair etc. of reimported goods was prescribed. As this was not in force during the period in this case, only section 20 of the CA/62 read with Notfn. 132/61-Cus was applicable even to 100% EOUs.

7. We have considered the arguments putforth by both the sides. We find that 100% EOU derives its existence under law from the approval by the Secretariate for Industrial Approvals in the Department of Industrial Development of Govt. of India where the Board of Approval is the competent body to admit any applicant under the 100% EOU scheme subject to conditions attached to the Letter of Intent/Permission. It is not disputed that the appellant is in possession of such a letter of intent/permission. However, we find that in the conditions governing 100% EOUs, it is specifically mentioned that production of the undertaking under this scheme shall be undertaken to be manufactured in customs bond. It is also mentioned that a percentage of rejects which ma