Deemed export clearances treated as home consumption for SSI exemption when Chapter X procedure was not followed.

Deemed export clearances made to buyers holding advance or intermediate licences were held not to qualify for exclusion from aggregate turnover under Notification No. 1/93-CE where the Chapter X procedure under Rule 13 of the Central Excise Rules, 1944 was not followed and duty was paid on the clearances. The majority reasoned that Notification No. 49/94-CE(NT) operated only when the prescribed statutory procedure was complied with, and that deemed exports under the EXIM Policy were limited to the specific benefits provided thereunder. The clearances were therefore treated as home consumption clearances for SSI exemption purposes, and their value had to be included in the aggregate computation.

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Issues: Whether the value of deemed exports had to be included while computing the aggregate value of clearances for availing SSI exemption under Notification No. 1/93-CE.

Analysis: The clearances in question were made to a buyer holding advance/intermediate licences, but the prescribed Chapter X procedure under Rule 13 of the Central Excise Rules, 1944 was not followed and duty was paid on the clearances. The majority held that Notification No. 49/94-CE(NT) operated only where the statutory procedure was complied with, and that deemed exports cannot be treated as exports for every purpose. The scope of deemed exports under the EXIM Policy was confined to the benefits specifically provided thereunder, and the clearances in question were treated as clearances for home consumption for the purpose of Notification No. 1/93-CE.

Conclusion: The value of deemed exports was required to be included in the computation of aggregate clearances, and the revenue's appeal succeeded.

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