Additional excise duty on export-bound captive-use fabrics depended on proof of exclusive bond export and no domestic clearances.

Additional excise duty on processed fabrics cleared for captive use in making export goods was held, in principle, not to arise where the goods were exported under bond under Rule 13(1)(b) and the export notification applied. Notification No. 67/95-C.E., however, was construed as covering only basic excise duty and not by itself as excluding additional excise duty. Because the record did not conclusively show whether the processed fabrics were used exclusively in export-bound made-up articles or whether any clearances entered the domestic tariff area, factual verification was required. The matter was remanded for that limited inquiry; if wholly exported under bond, no additional excise duty would be payable.

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Issues: Whether additional excise duty was leviable on processed fabrics cleared for captive use in the manufacture of made-up articles intended for export under bond, and whether the exemption under Notification No. 67/95-C.E. excluded such duty where the goods were covered by the export-removal framework under Rule 13(1)(b) and Notification No. 47/94-C.E.

Analysis: The Tribunal held that the expression "whole of duty of excise" in Notification No. 67/95-C.E. was confined to basic excise duty and, by itself, did not answer the liability to additional excise duty. It accepted the legal position that where goods are exported under bond under Rule 13(1)(b) of the Central Excise Rules, 1944 and the relevant export notification applies, additional excise duty is not attracted. However, the record did not contain a categorical finding whether the processed fabrics were in fact used exclusively in the manufacture of made-up articles exported under bond, or whether any clearances had gone into the domestic tariff area. The matter therefore required factual verification.

Conclusion: The legal contention of the assessee was accepted in principle, but the demand was not finally set aside. The case was remanded to verify whether the goods were wholly exported under bond; if so, no additional excise duty would arise, and if domestic clearances were found, additional excise duty would be payable.

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