Deemed export treatment for DTA clearances sustained; notification benefit could not be denied absent physical exports.

Clearances of shrimp feed in the Domestic Tariff Area were treated as deemed exports where the unit was authorised to sell its entire production in India and the Development Commissioner accepted the clearances for discharge of export obligation and net foreign exchange earning requirements. On that basis, the Tribunal held that customs and excise authorities could not deny the benefit of Notification No. 2/95-C.E. merely because there were no corresponding physical exports or because DTA sales allegedly exceeded 50% of FOB export value. The demand was therefore unsustainable, and the notification benefit was allowed.

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Issues: Whether the assessee's clearances of shrimp feed in the Domestic Tariff Area were entitled to the benefit of Notification No. 2/95-C.E. despite the department's objection that DTA sales exceeded 50% of the FOB value of physical exports.

Analysis: The unit had been permitted by the licensing authorities to sell the entire production in India, and the Development Commissioner treated the DTA clearances as satisfying the export obligation and net foreign exchange earning requirement. The Tribunal held that, in these circumstances, the clearances had to be treated as deemed exports for the purpose of the notification. Since the competent export authorities had accepted the clearances for discharge of export obligation and issued the export obligation discharge certificate, the customs/excise authorities could not deny the notification benefit on the footing that there were no corresponding physical exports. The demand was therefore not sustainable.

Conclusion: The assessee was entitled to the benefit of Notification No. 2/95-C.E., and the demand was set aside in favour of the assessee.

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