EOU exemption for exports to Bhutan cannot be denied by rupee-realisation conditions from a different export procedure.

Goods manufactured in a 100% export oriented undertaking and cleared to Bhutan remained exempt from central excise duty under Notification No. 125/84-C.E., because the notification exempted such goods unless they were allowed to be sold in India. Clearance to Bhutan was not a sale in India, as Bhutan is a sovereign State. A rupee-realisation condition drawn from export procedure under Rule 13 and Notification No. 150/81-C.E. could not restrict the separate exemption under Notification No. 125/84-C.E., and a circular could not impose a duty liability absent such a restriction in the notification itself.

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Issues: Whether excisable goods manufactured in a 100% Export Oriented Undertaking and cleared to Bhutan were entitled to exemption from central excise duty under Notification No. 125/84-C.E., notwithstanding receipt of sale proceeds in Indian rupees and the conditions associated with export under bond.

Analysis: Notification No. 125/84-C.E. exempts all excisable goods produced or manufactured in a 100% export oriented undertaking from the whole of the duty of excise, subject only to the proviso that the exemption does not apply if the goods are allowed to be sold in India. The clearance of goods to Bhutan could not be treated as a sale in India, since Bhutan is an independent sovereign State. The currency condition relied upon by the Revenue arose from the export procedure under Rule 13 of the Central Excise Rules, 1944 and from Notification No. 150/81-C.E., but that condition did not qualify or curtail the separate exemption granted to a 100% EOU under Notification No. 125/84-C.E. A duty liability could not be imposed by circular when the exemption notification itself contained no such restriction.

Conclusion: The goods cleared to Bhutan remained exempt from central excise duty, and the demand was not sustainable.

Final Conclusion: The assessee was entitled to the benefit of the exemption for its 100% export oriented unit clearances to Bhutan, and the duty demand was set aside.

Ratio Decidendi: A specific exemption for goods manufactured in a 100% export oriented undertaking prevails according to its own terms, and a currency condition attached to a different export procedure cannot be used to deny that exemption where the goods are not sold in India.

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