DTA sale of vegetable oil by an export unit was held not liable to duty where no EOU-linked benefit applied.

Vegetable oil cleared in the domestic market by a unit authorised only to export deoiled cake was treated as akin to DTA goods, because no export permission covered the oil and no customs or central excise concession had been obtained on the inputs or machinery. The attempt to levy duty on the basis of a notional customs-linked valuation under Notification No. 8/97, as amended, was not sustained on these facts. The demand on the DTA sale of vegetable oil was therefore held unsustainable, and the setting aside of the demand by the lower appellate authority was upheld.

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Issues: Whether vegetable oil cleared in the domestic market by a unit permitted only to export deoiled cake could be subjected to excise duty as a by-product of a 100% Export Oriented Unit, and whether the demand could be sustained notwithstanding Notification No. 8/97 as amended.

Analysis: The unit had not been permitted to export vegetable oil and was allowed to export only deoiled cake. No Customs or Central Excise duty concession had been obtained on the raw material or machinery, and the oil seeds as well as the vegetable oil were stated to be fully exempted. In these circumstances, the vegetable oil sold in the domestic market was treated as akin to the goods of a Domestic Tariff Area unit. The demand proceeded on the footing that the clearance was liable at a notional duty linked to the customs duty structure, but the facts did not justify imposing such burden where the goods were not enjoying EOU-linked benefits and the domestic sale was not shown to violate the scheme.

Conclusion: The demand of duty on the DTA sale of vegetable oil was not sustainable. The order of the lower appellate authority setting aside the demand was upheld, and the revenue's appeal failed.

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