2004 (12) TMI 215 - AT - Central Excise

Export Oriented Unit - Clearance to DFRC/ARO holder - Exemption - Held that - the clearances to DFRC holders and also to supplies against foreign exchange cannot be treated in par with clearances permitted by the department for sale to DTA. It was found that sale in DTA against foreign exchange would be covered under para. 9.10(b) and would count against Net Foreign Exchange Target required under the policy - appeal allowed.

Summary

Issues:
- Whether clearances from 100% EOUs to DTA against DFRC Certificate holders/ARO holders and against realization of foreign exchange are entitled to exemption under Notification No. 125/84-C.E., dated 26-5-1984.

Analysis:
1. Background: The case involved three appeals by different companies against Orders-in-Original passed by the Commissioner of Central Excise, Hyderabad and Visakhapatnam, regarding clearances from 100% EOUs to DTA without payment of duty. The main issue was the applicability of Notification No. 125/84-C.E., dated 26-5-1984, which exempts excisable goods produced by 100% EOUs from excise duty if not sold in India.

2. Argument for DFRC Holders: The appellants contended that clearances to DFRC holders were exempt under Notification No. 125/84. They argued that the goods were not "allowed to be sold in India" as per Supreme Court interpretation, and thus, not liable for excise duty. Reference was made to a similar case by CESTAT, which supported their position.

3. Argument for Para 9.10(b) Clearances: For the third appellant, clearances under para 9.10(b) of EXIM Policy against payment in foreign exchange were claimed to be exempt under Notification No. 125/84 and Notification No. 55/91. The argument was that these clearances, earning foreign exchange, were akin to exports and should not attract excise duty.

4. Revenue's Position: The Revenue argued that all clearances to buyers in India should be considered as "allowed to be sold in India," making them ineligible for the exemption. They contended that the Supreme Court's interpretation did not apply in this case.

5. Tribunal's Decision: After considering the arguments, the Tribunal agreed with the appellants. They held that clearances to DFRC holders and under para 9.10(b) were not akin to sales in India, thus falling under the exemption of Notification No. 125/84. The Tribunal also noted that even if duty was paid, the appellants could claim a refund, making the process revenue neutral. Therefore, the appeals were allowed with consequential relief.

This detailed analysis of the judgment highlights the key arguments presented, the interpretations of relevant laws and notifications, and the ultimate decision reached by the Tribunal in favor of the appellants based on the applicability of the exemption notification.