Exported excisable goods: procedural non-compliance alone does not sustain duty demand absent diversion to the domestic market.

Duty demand on cotton yarn sent for conversion into knitted fabrics and exported was held unsustainable because the entire quantity was admittedly exported and there was no diversion to the domestic market. The procedural non-compliance with Rule 96E of the Central Excise Rules, 1944 and Notification No. 47/94-C.E. (N.T.) did not, by itself, create liability where the substantive fact of export was undisputed. The cited precedent on exported goods not attracting duty absent home consumption diversion was followed, and the appeals were allowed.

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Issues: Whether duty demand on cotton yarn removed for processing into knitted fabrics and exported was sustainable when the removal did not strictly conform to Rule 96E of the Central Excise Rules, 1944 and the procedure under Notification No. 47/94-C.E. (N.T.) was not followed.

Analysis: The demand was founded only on the ground that the yarn was sent to a facility which did not answer the definition of factory under Rule 96E. There was, however, no dispute that the entire quantity of yarn was converted into fabrics and exported, and no finding that the goods were diverted for home consumption. The procedural lapse in following the prescribed export mechanism did not, by itself, create a real liability where the substantive fact of export was undisputed. The reasoning in the cited precedent on exported goods not being subjected to duty in the absence of domestic diversion was applied, and the same conclusion was reinforced by the earlier Tribunal decision relied upon.

Conclusion: The duty demands were not sustainable and the appeals were allowed.

Ratio Decidendi: Where excisable goods are admittedly converted and exported without diversion to the domestic market, a mere failure to comply with the prescribed procedure does not sustain a duty demand.

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