Exported goods not liable to central excise duty; procedural lapse in prior permission treated as condonable

Central excise duty was held not recoverable on cotton yarn used in grey cotton fabrics that were ultimately exported, because the exported character of the goods was undisputed and the duty demand on exported goods was not sustainable. Non-obtaining of prior permission under Rule 56B was treated as a procedural lapse rather than a substantive bar, and that default was condoned on the facts. Relief therefore followed for the assessee, with the export of the goods defeating the excise demand.

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Issues: Whether central excise duty was recoverable on cotton yarn used in the manufacture of grey cotton fabrics that were ultimately exported, and whether non-obtaining of prior permission under Rule 56B disentitled the appellant to relief.

Analysis: The fabrics cleared to the processing unit were found to have been exported, and that factual position was not disputed. The absence of prior permission under Rule 56B was treated as a procedural lapse. Once the goods were exported, the demand for central excise duty on the exported goods was held not sustainable, and the procedural default was considered condonable in the facts of the case.

Conclusion: The duty demand was not sustainable and the procedural lapse was condoned, resulting in relief to the appellant.

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