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3.9. The Petitioner Company replied to the Respondent No.2 by correspondence dated 12.8.2015 pointing out that an EOU procuring goods duty free from domestic manufacturers stepped into the shoes of such manufacturer, and therefore when the EOU was required to pay excise duty on such goods in eventualities like debonding, the EOU could discharge such duty liability in the same manner which was permissible to the manufacturer of such goods for discharging duty liability. Whereas in case of imported goods, the EOU was required to pay custom duties in the same manner (i.e. cash) that had to be adopted by an importer.

3.12 The Respondent No.2 failed to appreciate the provisions of the EOU scheme and that of Notification No.22/2003-CE, and therefore his insistence and direction for payment of excise duty leviable on the goods procured by the Petitioner Company duty free in cash is wholly illegal and without jurisdiction. EOU is a manufacturer that steps into the shoes of the original manufacturer of the goods who supplied all such goods to an EOU without payment of duty by virtue of the scheme of Notification No.22/2003-CE and the bond executed by the concerned EOU thereby taking upon itself all the liabilities and obligations of the original manufacturer if the goods procured duty free were not utilized for the intended purpose.

NEUTRAL CITATION C/SCA/14949/2015 JUDGMENT DATED: 18/12/2024 undefined It was specifically submitted that an EOU is also manufacturer and all the benefits allowed to manufacturers are admissible to an EOU at the time of debonding and therefore, an EOU is allowed to avail Cenvat credit on capital goods, inputs and taxable services and must also consequently, be allowed to utilize duly availed Cenvat credit for discharging liabilities of the excise duty foregone on duty free procurement.

9. Discussion and Findings :-

9.1 The petitioner No.1-Company is engaged in manufacturing of pharmaceutical and chemical products. The petitioners had their factory situated in village Lodriyal in Taluka Sanand, District Ahmedabad which was allowed to be operated as 100% Export Oriented Unit (EOU) . The petitioners had operated the unit as an "EOU" till January, 2015 when one of its manufacturing units was proposed to be excluded from the existing EOU, a practice known as partial debonding, which is permissible under the EOU Scheme. The Development Commissioner, KASEZ had in principle allowed the petitioners' application for partial debonding but certificate of confirmation regarding discharging duties foregone on the goods lying unutilized in the petitioners' plant that was proposed, had to be taken from the respondent No.2 .The petitioners had proposed that the customs duty foregone on the imported materials shall be paid in cash whereas, the excise duty foregone on the goods lying in the plant shall be paid from legally availed Cenvat credit lying with the petitioners. The petitioners had further reasoned that the difference in the modes of payment was on account of the fact that the customs duties were required to be discharged by any importer(s) by paying dues as prescribed whereas, the excise duties could be paid by the manufacturer(s) of the goods from the accrued Cenvat credit of the NEUTRAL CITATION C/SCA/14949/2015 JUDGMENT DATED: 18/12/2024 undefined said manufacturer (s).