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Issues: (i) whether the unit attained debonded status only on issuance of the final debonding order under the Foreign Trade Policy, so that export clearances made earlier were treated as clearances by a 100% EOU and no rebate of duty was admissible; (ii) whether the duty paid on such exports, though not legally payable, could be retained by the Department or was liable to be returned as a voluntary deposit.
Issue (i): whether the unit attained debonded status only on issuance of the final debonding order under the Foreign Trade Policy, so that export clearances made earlier were treated as clearances by a 100% EOU and no rebate of duty was admissible.
Analysis: Para 6.18 of the Foreign Trade Policy 2004-2009 required deposit of duties and procurement of a no-dues certificate, followed by application to the Development Commissioner and issuance of the final debonding order. On the facts, the final debonding order was issued on 31-03-2008 and the relevant shipping bill showed export under the 100% EOU scheme. The governing notification granted unconditional exemption to goods manufactured by a 100% EOU and cleared for export, and section 5A(1A) barred payment of duty where the exemption was absolute. Therefore, the exports made before the final debonding order continued to be governed by the EOU regime.
Conclusion: The rebate claim was not admissible for exports made before 31-03-2008, as the unit remained a 100% EOU until the final debonding order.
Issue (ii): whether the duty paid on such exports, though not legally payable, could be retained by the Department or was liable to be returned as a voluntary deposit.
Analysis: Since the export goods were covered by an absolute exemption, the duty paid on them was without authority of law. The Government held that such payment could not be treated as duty legally leviable on the exported goods, but was a voluntary deposit made by the assessee. On that basis, the amount could not be retained by the Department and had to be returned in the manner in which it was initially paid.
Conclusion: The assessee was entitled to return of the duty amount as a voluntary deposit, though not to rebate under the export rebate scheme.
Final Conclusion: The rejection of rebate was sustained, but the order was modified to the extent that the amount paid was directed to be treated as a refundable voluntary deposit, resulting in partial relief to the assessee.
Ratio Decidendi: Where a notification grants absolute exemption to export clearances by a 100% EOU, duty paid on such clearances is not legally payable and cannot be rebated, but may be as a voluntary deposit if collected without authority of law.
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