Exemption on clearance to EOU upheld for warehoused petroleum products after withdrawal of warehousing facility

Petroleum products already lying in bond when the warehousing facility was withdrawn remained eligible for exemption on subsequent clearance to an EOU under the relevant notification. The Tribunal found that the department's contrary interpretation would defeat the exemption's intended relief on such clearances. It also relied on a coordinate Bench decision taking the same view in a similar matter involving the same assessee. On that basis, the demand of duty and consequential penalties were held unsustainable and the assessee's appeals were allowed.

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Issues: Whether petroleum products lying in bond when the warehousing facility was withdrawn could be denied the benefit of exemption on subsequent clearance to an EOU, and whether the demand of duty and consequential penalties were sustainable.

Analysis: The goods were already in warehouse when the warehousing facility was withdrawn, and their later removal was to an EOU under an exemption notification covering such clearances. The interpretation adopted by the department would defeat the benefit of the exemption notification and deprive the assessee of a relief that would otherwise have been available on clearance to the EOU. The Tribunal also noted that a coordinate Bench had already taken the same view in a similar matter involving the same assessee.

Conclusion: The demand of duty and penalties were not sustainable, and the appeals were allowed in favour of the assessee.

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