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2011 (3) TMI 518 - AT - CustomsDeemed exports - 100% Export Oriented Units (EOUs) do not export 100% of their production - Notification No. 2/95 dated 4-1-1995 - Though it is very clear that DTA sale entitlement of EOU/EPZ unit under paragraph 9.9(b) would be up to 50% of FOB value of exports (i.e. physical export only) - This office has no means to verify if the value of deemed exports were taken into account while computing the FOB value of exports for the relevant period since the DTA sale entitlement is granted to the unit based on the basis of application filed duly certified by chartered accountant and bond officer - The fact that deemed exports are counted towards fulfilment of export obligation as a concession under a separate provision namely para 9.10 cannot automatically entitle the appellants to a duty concession under para 9.9 and Notification No. 2/95, when the lawmakers have not specifically provided for inclusion of such domestic clearances for the purposes of calculating DTA entitlement - Appeal is dismissed
Issues Involved:
1. Eligibility of deemed exports in computing DTA sale entitlement under para 9.9(b) of the EXIM policy. 2. Interpretation of the term "FOB value of exports" in Notification No. 2/95-C.E. dated 4-1-95. Detailed Analysis: 1. Eligibility of deemed exports in computing DTA sale entitlement under para 9.9(b) of the EXIM policy: The appellant, an Export Oriented Unit (EOU), contended that deemed exports should be included in the calculation of DTA sale entitlement under para 9.9(b) of the EXIM policy. The EXIM policy allows EOUs to sell in the Domestic Tariff Area (DTA) up to 50% of the FOB value of exports, subject to applicable duties and fulfillment of minimum NFEP. The appellant argued that deemed exports, which are supplies within the country but treated as exports for certain benefits, should be included in this calculation. The Department, however, argued that the term "50% of the FOB value of exports" refers only to physical exports taken out of India and not to deemed exports, which are essentially domestic clearances. The Department cited the Board's Circular F. No. 305/48/2000-FTT dated 7-4-2000, which clarified that DTA sale entitlement is limited to 50% of the FOB value of physical exports only. The Tribunal noted that the Department of Revenue and the Department of Commerce had a consistent view that only physical exports should be considered for calculating DTA entitlement. The Tribunal referred to several communications and circulars, including a letter from the Development Commissioner and a communication from the Ministry of Commerce & Industry, which supported this interpretation. 2. Interpretation of the term "FOB value of exports" in Notification No. 2/95-C.E. dated 4-1-95: The appellant's counsel argued that the term "exports" as defined in the Customs Act, 1962, and the Foreign Trade (Development & Regulation) Act, 1992, should include deemed exports for the purpose of para 9.9(b) of the EXIM policy and Notification No. 2/95. The counsel cited several judicial decisions to support this interpretation. The Department's representative argued that the term "FOB value of exports" in para 9.9(b) and the third proviso to Notification No. 2/95 refers only to physical exports. The representative cited the decision of the Hon'ble Madras High Court in the case of BAPL Industries Ltd. v. Union of India, which upheld the validity of the circular dated 7-4-2000 and held that physical export and deemed export are different. The Tribunal examined the plain language of para 9.9(b) of the EXIM policy and the amended Notification No. 2/95, which refers to "50% of the free on board value of exports." The Tribunal noted that the term "Free on Board" or "FOB" is an international commercial term referring to an export consignment placed on board a vessel, ready to leave the domestic territory of a country. The Tribunal also referred to the definitions of "exports" in the Customs Act, 1962, and the Foreign Trade (Development & Regulation) Act, 1992, both of which mean taking goods out of India. The Tribunal concluded that the term "50% free on board value of export" in the EXIM policy and Notification No. 2/95 refers to physical exports out of India. The Tribunal found no need to interpret the term "exports" to include deemed exports, as the plain language of the policy and notification, read with the statutory definitions, was clear and straightforward. Conclusion: The Tribunal found that the authorities of both the Department of Revenue and the Department of Commerce consistently interpreted para 9.9(b) of the EXIM policy and the amended Notification No. 2/95 to mean that only physical exports should be considered for calculating DTA entitlement. The Tribunal also found support for this view in the decision of the Hon'ble Madras High Court in the case of BAPL Industries Ltd. v. Union of India. The Tribunal dismissed the appeal, finding no reason to interfere with the impugned Order-in-Appeal.
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