Export incentive exemption, retrospective amendment, and borrowed-funds interest disallowance were all revisited on binding precedent and remand.

Export house premium was treated as eligible for exemption under the export incentive provision, following the Supreme Court ruling applied for earlier years, so the assessee's claim succeeded on that point. Interest levied under the penal interest provisions had to be reconsidered in light of the retrospective amendment, because the amendment was binding on statutory authorities and had not been applied when the assessment was completed; the matter was remanded for fresh consideration after hearing the assessee. Disallowance of proportionate interest on borrowed funds diverted for non-business purposes was also remanded, the issue being covered by binding Division Bench precedent and requiring reconsideration on the facts.

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Issues: (i) Whether the respondent-assessee was entitled to exemption under the export incentive provision on export house premium. (ii) Whether interest levied under the penal interest provisions could be sustained in view of the retrospective amendment. (iii) Whether the disallowance of proportionate interest on borrowed funds diverted for non-business purposes required reconsideration.

Issue (i): Whether the respondent-assessee was entitled to exemption under the export incentive provision on export house premium.

Analysis: The issue was stated to be covered by the Supreme Court judgment for earlier years.

Conclusion: The entitlement to exemption on export house premium was answered in favour of the assessee.

Issue (ii): Whether interest levied under the penal interest provisions could be sustained in view of the retrospective amendment.

Analysis: The retrospective amendment to the relevant sections was treated as binding on statutory authorities unless declared invalid. As the assessment had been completed before the amendment and the authorities had not considered its effect, the matter required fresh consideration on the amended provisions after giving the assessee an opportunity.

Conclusion: The orders on this issue were set aside and the matter was remanded to the officer for reconsideration under the amended provisions.

Issue (iii): Whether the disallowance of proportionate interest on borrowed funds diverted for non-business purposes required reconsideration.

Analysis: The issue was held to be covered by the binding Division Bench decision on diversion of borrowed funds, and the factual application of those principles was left for reconsideration by the officer after hearing the assessee.

Conclusion: The orders on this issue were set aside and the matter was remanded to the officer for reconsideration in the light of the binding precedent.

Final Conclusion: The appeal succeeded on the exemption issue, while the remaining issues were sent back for fresh decision on the basis of the retrospective amendment and the binding precedent.

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