High Court Held Circular Clarifying Duty-Free Import of Inputs by 100% EOU Settles Dispute:

Jindal Saw Limited is a company engaged in the manufacture and sale of pipes and operating as a 100% Export Oriented Unit (EOU), having imported capital goods and inputs under the duty-free exemption framework applicable to EOUs. The petitioner was entitled to import inputs without payment of customs duty under Notification No. 52/2003-CUS dated 31/03/2003, as the manufactured goods were meant for export. 

The dispute arose when the DRI and Customs authorities seized goods imported by the petitioner on 02/07/2008 and 03/07/2008. The authorities primarily alleged that the imported steel plates were being utilised for manufacturing jigs, dies and tools, contrary to the basic permission granted to the petitioner for manufacture of Submerged Arc Welded Steel Pipes. 

The petitioner challenged the seizure before the Gujarat High Court and sought release of the goods, arguing that the imports were covered by the applicable exemption notification. During the pendency of the proceedings, the petitioner was required to deposit amounts and furnish a bank guarantee towards the alleged duty liability. 

Later, the Government of India issued Circular No. 22/2009-CUS dated 19/08/2009, clarifying that duty-free import/domestic procurement of raw materials could be allowed for manufacture of finished goods as well as capital goods for use within the EOU. 

The High Court held that the Circular dated 19/08/2009 was squarely applicable to Jindal Saw Limited. The Court noted that the Department had not controverted the applicability of the Circular to the petitioner despite the earlier order of the Court and subsequent opportunities.  The Court observed that the Circular had effectively laid the controversy to rest, making the show-cause notice insignificant. Accordingly, the writ petition was allowed and the seizure memos dated 02/07/2008 and 03/07/2008 were quashed and set aside. The show-cause notice dated 22/12/2008 was also quashed.