Export oriented unit exemption and limitation relief followed from final exit order timing and full disclosure in ER-2 returns.

An export oriented undertaking remains entitled to scheme benefits until a final exit order is issued, and clearance of by-products to the domestic tariff area was covered by the amended exemption notification during that period; the exemption was therefore available on the disputed clearances. Full disclosure of the proposed clearances, self-assessment, department correspondence, and reporting in ER-2 returns negatived any allegation of suppression, so the extended limitation period could not be invoked. The duty demand and related penalties were consequently not sustainable.

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Issues: (i) whether an export oriented undertaking continued to be entitled to exemption on clearance of by-products to the domestic tariff area before the final exit order from the scheme; (ii) whether the demand was barred by limitation in the absence of suppression, where the clearances and exemption claim were disclosed in ER-2 returns.

Issue (i): whether an export oriented undertaking continued to be entitled to exemption on clearance of by-products to the domestic tariff area before the final exit order from the scheme.

Analysis: The applicable policy position treated an export oriented undertaking as continuing to remain such until the date of the final exit order. The withdrawal of the proposal to exit the scheme and the later final debonding order showed that, during the relevant period, the unit had not ceased to be an export oriented undertaking. The exemption notification, as amended, specifically covered clearance of by-products to the domestic tariff area under the relevant policy clause. The clearance in question was therefore not to be treated as a clearance in the course of exit from the scheme.

Conclusion: The assessee was entitled to the exemption on the by-product clearances.

Issue (ii): whether the demand was barred by limitation in the absence of suppression, where the clearances and exemption claim were disclosed in ER-2 returns.

Analysis: The record showed prior disclosure of the proposed clearances, self-assessment of duty, correspondence with the department, and disclosure in ER-2 returns. Once the department had full knowledge of the material facts from the prescribed returns and connected communications, suppression of facts could not be alleged. In such circumstances, the ingredients for invoking the extended period were not made out.

Conclusion: The demand was barred by limitation.

Final Conclusion: The duty demand and related penalties could not be sustained, and the assessee succeeded on both merits and limitation.

Ratio Decidendi: An export oriented undertaking remains eligible for the scheme benefits until a final exit order is issued, and full disclosure in prescribed returns negatives suppression and prevents invocation of the extended period.

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