Indian-manufactured inputs and deemed export benefits do not change product character for concessional duty relief and stay of recovery

Polyester staple fibre manufactured in India does not lose its character as Indian-manufactured goods merely because the supplier availed deemed export benefits. For Notification No. 23/2003-C.E., the applicable concessional rate depended on whether the goods cleared into the DTA were produced or manufactured wholly from raw materials produced or manufactured in India; that condition was satisfied here because the assessee used cotton and polyester staple fibre manufactured in India. The term "imported goods" in the explanation could not be equated with goods not produced or manufactured in India. On that basis, the assessee was treated as having a strong prima facie case, and financial hardship supported waiver of pre-deposit and stay of recovery pending appeal.

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Issues: Whether polyester staple fibre received by the assessee under deemed export benefit could be treated as not manufactured in India for the purpose of Notification No. 23/2003-C.E., and whether the assessee was entitled to waiver of pre-deposit and stay of recovery.

Analysis: The applicable rate under Sl. No. 3 of the notification depended on whether the goods cleared into DTA were produced or manufactured wholly from raw materials produced or manufactured in India. The assessee used cotton produced in India and polyester staple fibre manufactured in India by the supplier. The mere fact that the supplier had availed deemed export benefits did not alter the character of the fibre as goods manufactured in India. The expression "imported goods" in the explanation could not be equated with goods not produced or manufactured in India. On that basis, the assessee had a strong prima facie case, and the financial hardship pleaded also supported relief from pre-deposit.

Conclusion: The assessee was entitled to waiver of pre-deposit and stay of recovery pending disposal of the appeals.

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