SEZ clearance and excise exemption: clinker demand failed at the pre-deposit stage, with stay granted on duty and penalty.

Clearance of cement to a Special Economic Zone was treated as export for this dispute because an SEZ is regarded as outside the domestic tariff area. On that basis, the final product was not treated as goods exempt from the whole of excise duty or chargeable at nil rate, so the proviso in Notification No. 67/95-C.E. did not plainly apply to clinker used in the cement. The appellants therefore established a prima facie case against the duty demand at the pre-deposit stage, and waiver of pre-deposit with stay of recovery was granted for the duty and penalty demands.

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Issues: Whether the appellants had made out a prima facie case for waiver of pre-deposit and stay of recovery of duty and penalty demanded on clinker contained in cement cleared to a Special Economic Zone, in the context of denial of exemption under Notification No. 67/95-C.E. dated 16-3-95.

Analysis: Clearance of cement to a Special Economic Zone was treated as export for the purpose of the dispute, since the Special Economic Zone is regarded as outside the domestic tariff area. On that basis, the final product did not fall within the category of goods exempt from the whole of duty of excise or chargeable to nil rate of duty so as to attract the proviso to the notification against the input clinker. The appellants therefore showed a prima facie case that the demand raised on clinker was not maintainable at the stage of pre-deposit.

Conclusion: The appellants were entitled to waiver of pre-deposit and stay of recovery in respect of the duty and penalty demands.

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