EOU notification benefit extended to raw material purchases for converted and pre-existing units under the export policy scheme.

The notification benefit attached to the 100% Export Oriented Unit and to raw material used for export production, not merely to a newly formed unit. Read with the Export Import Policy 1992-97, converted Domestic Tariff Area units were entitled to post-conversion benefits at par with newly set up EOUs, subject to the exclusion of plant, machinery and equipment already installed before conversion. A narrow reading of the sales tax notification that excluded pre-existing units would have defeated the export-promotion scheme and created an artificial classification. The assessee was therefore entitled to the benefit on raw material purchases for all its units, including those existing before EOU registration.

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Issues: Whether the assessee, having converted existing units and established an additional unit as a 100% Export Oriented Unit under the Export Import Policy 1992-97, was entitled to the benefit of the notification dated 13.06.1994 in respect of raw material purchased for all its units, including the units existing prior to registration as an EOU.

Analysis: The benefit under the notification was held to attach to the unit registered as a 100% EOU and to the raw material required for manufacture of export goods, not to the owner as such. The Export Import Policy 1992-97 permitted conversion of existing Domestic Tariff Area units into EOUs and treated them at par with newly set up EOUs for post-conversion benefits, except that no concession was available for plant, machinery and equipment already installed before conversion. The policy also treated supplies from DTA to EOU as deemed exports and extended tax-related benefits on raw materials and inputs used for export production. The notification issued under the State sales tax law had to be read in the light of that policy, so a narrow construction excluding converted or pre-existing units would defeat the export-promotion object and create an artificial classification without nexus to the purpose of the scheme.

Conclusion: The assessee was entitled to the notification benefit on purchase of raw material for all its units, including the pre-existing units, while the unit installed after registration as a 100% EOU was also rightly treated as a new industrial unit.

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