2007 (8) TMI 157 - AT - Central Excise

Clearances made by EOU to DTA after permission of D.C. will be treated as physical exports Above clearances are against free foreign exchange so benefit of Not.20/98 (concessional rate of duty) and Notification 2/95 are entitled but as sale is in DTA Exemption Not. 125/84 is not applicable

Summary

Issues:
1. Interpretation of Exim Policy regarding clearances in terms of para 9.10(b) and duty implications.
2. Applicability of Notification No. 20/98-CE to clearances under para 9.10(b) of the Exim Policy.
3. Entitlement to exemption under Notification No. 125/84-CE for goods cleared with permission from Development Commissioner.

Issue 1: Interpretation of Exim Policy regarding clearances in terms of para 9.10(b) and duty implications:
The case involved M/s. Kay Bee Tex Spin Ltd., an EOU engaged in manufacturing polyester products. The dispute arose when the department alleged short-payment of duty amounting to Rs. 3,70,64,834 due to clearances of polyester fabrics at a lower rate than prescribed. The department contended that benefits of certain Notifications were not applicable to clearances under para 9.10(b) of the Exim Policy. The Commissioner of Central Excise confirmed the demand and imposed penalties. The Tribunal analyzed the Policy provisions, stating that clearances under para 9.10 are linked to para 9.9, treating such clearances as export obligations. The Tribunal held that clearances under para 9.10 are akin to physical exports, entitling them to benefits under relevant Notifications.

Issue 2: Applicability of Notification No. 20/98-CE to clearances under para 9.10(b) of the Exim Policy:
The Tribunal referred to the Supreme Court's decision in Virlon Textiles, where it was held that clearances in DTA against foreign exchange under para 9.10 are covered by para 9.9 of the Policy. The Supreme Court ruled that such clearances are entitled to exemption under Notification No. 2/95-CE. Applying the Virlon Textiles precedent, the Tribunal concluded that clearances under para 9.10(b) should be treated as physical exports, making them eligible for the benefits of Notification No. 20/98-CE, subject to specified conditions.

Issue 3: Entitlement to exemption under Notification No. 125/84-CE for goods cleared with permission from Development Commissioner:
Regarding the exemption under Notification No. 125/84-CE, the Tribunal held that goods cleared with permission from the Development Commissioner were considered as allowed for sale in India, making them liable for excise duty under the Central Excise Act. Consequently, the benefit of Notification No. 125/84-CE was deemed not applicable to the goods in question. The Tribunal answered the reference accordingly, directing the Original Bench for further action based on the provided analysis.

This comprehensive analysis of the judgment highlights the key issues addressed by the Appellate Tribunal CESTAT, Mumbai, regarding the interpretation of the Exim Policy provisions, applicability of Notifications, and entitlement to exemptions for goods cleared by the EOU.