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Issues: Whether cotton waste cleared by a 100% EOU to the Domestic Tariff Area was required to be included while computing the permissible DTA sale entitlement and whether duty demand on the cotton goods was sustainable.
Analysis: The Court noted that the Tribunal had examined Paragraphs 6.8(e), 9.9 and 9.20 of the Exim Policy and Notification No. 23/2003-CE and had found that cotton waste arising during carding, combing and ginning does not amount to manufacture of a new product with a distinct name, character or use. The cotton waste was exempted unconditionally under the notification, and the Assistant Development Commissioner had clarified that such waste was not to be counted against the DTA sale entitlement. On that basis, the Court found no infirmity in the Tribunal's view that the value of cotton waste could not be included for computing the DTA ceiling.
Conclusion: The issue was decided against the Revenue and in favour of the assessee; the duty demand was not sustainable.
Final Conclusion: The appeals failed for want of merit and were dismissed.
Ratio Decidendi: Unconditionally exempt waste arising in the manufacturing process, which does not result in a new manufactured product, cannot be counted towards DTA sale entitlement where the governing export policy and exemption notification do not require such inclusion.
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