2010 (1) TMI 355 - AT - Central Excise

EOU- the respondents are working as a 100% EOU and they were permitted to manufacture initially six products which were later on expanded to include another 22 and three products. The adjudicating Commissioner has considered all aspects of the case and has passed a detailed speaking order. Held that- the liberal view taken by the adjudicating Commissioner is amply justified and therefore, there is no reason to interfere with the impugned order. Consequently, the appeal filed by the Department is rejected.

Summary

Issues:
1. Import and domestic procurement of raw material for manufacture and export of pharmaceutical products by a 100% EOU.
2. Utilization of raw material for R&D purposes and not for export.
3. Claiming part of the products as waste and scrap under relevant exemption notification.
4. Expansion of products permitted for manufacturing by the Development Commissioner.
5. Compliance with export obligations and achievement of NFEP.
6. Interpretation of the Exim Policy regarding broad-bonding, treatment of waste and scrap, and rejects in export goods.
7. Object of the impugned notification to permit export and earn foreign exchange.

Analysis:
1. The Department argued that the respondent had imported and procured raw material for manufacturing and exporting pharmaceutical products as a 100% EOU but had used a substantial quantity for R&D purposes instead of export. The Department highlighted that some products could have been exported as similar products were marketed by sister units, and exemption was not available for any purpose other than manufacture and export under the relevant notification.

2. The respondent, represented by a consultant, clarified that they were initially allowed to manufacture six products which later expanded to include additional products. They mentioned a value cap on imports/procurements, of which only 37% was utilized. The respondent completed export obligations within three years instead of the allowed five years and referred to letters permitting the use of duty-free inputs for R&D purposes.

3. Upon review, the Tribunal found that the adjudicating Commissioner had considered all aspects, including the necessity of R&D for meeting export market requirements. The Commissioner acknowledged the fulfillment of export obligations and achievement of net NFEP by the respondent. The Tribunal noted the adherence to Exim Policy parameters regarding broad-bonding, treatment of waste and scrap, and rejects in export goods.

4. The Tribunal agreed with the liberal view taken by the adjudicating Commissioner, justifying the decision based on the objective of the impugned notification to facilitate exports and earn foreign exchange. Consequently, the appeal filed by the Department was rejected, affirming the Commissioner's order.

This detailed analysis of the judgment addresses the issues raised concerning the import and utilization of raw materials by the respondent, compliance with export obligations, and the interpretation of relevant policies and notifications governing the export of pharmaceutical products by a 100% EOU.