2017 (9) TMI 617 - HC - Central Excise

100% EOU - Deemed export - whether the CESTAT was right in reversing the judgment of the adjudicating authority by holding that respondent assessee who was 100% EOU unit was not required to pay duty on its domestic clearance against foreign exchange remittance? - Held that - In case of Maruti Cottex Limited 2004 (12) TMI 215 - CESTAT, BANGALORE , the Tribunal 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 dismissed - decided against Revenue.

Summary

Issues:
1. Applicability of the concept of "deemed export" to the Central Excise Act.
2. Removal of goods manufactured by a 100% EOU to DTA without payment of duty.
3. Reversal of judgment by CESTAT regarding duty payment by a 100% EOU unit.

Analysis:

1. The central issue in the case revolved around whether the respondent, a 100% EOU unit, was obligated to pay duty on domestic clearances against foreign exchange remittance. The Tribunal reversed the adjudicating authority's judgment, prompting the department to file an appeal.

2. The respondent, as part of the Exim policy, was permitted to clear goods in the DTA area and sell them domestically against foreign exchange remittance. The department contended that excise duty equivalent to customs duty on imported goods was payable on such clearances. However, the Tribunal, citing precedents, held that clearances against foreign exchange should be treated differently and would count towards the Net Foreign Exchange Target as per the policy.

3. The Tribunal's decision was supported by judgments like Maruti Cottex Limited and Jumbo Bag Ltd., which emphasized the distinction between clearances for DFRC holders and supplies against foreign exchange compared to clearances for sale to DTA. The Supreme Court had previously upheld the decision in the case of Maruti Cottex Limited, reinforcing the Tribunal's interpretation.

4. Ultimately, the High Court found no merit in the department's appeal and dismissed it, ruling in favor of the respondent. The questions raised were answered in favor of the respondent, leading to the dismissal of the tax appeals.

This detailed analysis highlights the core issues of the case, the arguments presented by both parties, the legal precedents relied upon, and the final judgment rendered by the High Court.