Export condition under duty-free yarn notification satisfied by supply to export-oriented undertaking and proof of final export.

Clearance of duty-free cotton yarn under Notification No. 43/2001-C.E. (N.T.) was held to satisfy the export condition where the manufactured terry towel fabrics were supplied to a 100% export-oriented undertaking and the final products were exported with proof of export produced. The operative requirement was export of the goods manufactured from the duty-free material, not that the assessee itself must physically export the final product. Following the consistent view on the same notification and identical issue, supply to the export-oriented undertaking was treated as sufficient compliance, and the demand was not sustainable.

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Issues: Whether clearance of duty-free cotton yarn under Notification No. 43/2001-C.E. (N.T.) was entitled to exemption when the manufactured terry towel fabrics were supplied to a 100% export-oriented undertaking and the final products were exported through that undertaking.

Analysis: The notification required the assessee to satisfy the export obligation by producing proof of export of the final product. The goods were cleared to another export-oriented undertaking for further processing, and the record showed that the final terry towels were exported and proof of export was produced. The operative requirement was export of the goods manufactured from the duty-free material, not that the assessee alone must effect the physical export. Following the earlier consistent view on the same notification and identical issue, supply to the export-oriented undertaking was treated as sufficient compliance with the export condition.

Conclusion: The clearance to the export-oriented undertaking satisfied the export condition under the notification, and the demand could not be sustained.

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