DTA clearances under Foreign Trade Policy conditions upheld for exemption, with duty demand found unsustainable.

Clearances of jute yarn to the Domestic Tariff Area were examined against Foreign Trade Policy conditions for retention of exemption under Notification No. 23/2003-CE. The record indicated that the assessee relied on paragraph 6.8(h) based on positive NFE, supported by correspondence with the Development Commissioner and departmental acknowledgment of compliance, while the notices did not establish breach of the raw-material condition. On that basis, the exemption was held available and the duty demand under the Central Excise Act was not sustainable.

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Issues: Whether the assessee's clearances of jute yarn to the Domestic Tariff Area were in accordance with the applicable Foreign Trade Policy conditions so as to retain the benefit of Notification No. 23/2003-CE, and whether duty demand could be sustained under Section 3 of the Central Excise Act, 1944.

Analysis: The assessee had been permitted advance DTA sales under paragraph 6.8(k) of the Foreign Trade Policy, 2004-09, but the record showed that the assessee asserted coverage under paragraph 6.8(h) on the basis of having achieved positive NFE. The adjudicating authority found support for that claim from the correspondence on record, including communications addressed to the Development Commissioner and the departmental acknowledgment of compliance with paragraph 6.18(e). It was also noted that the show cause notices did not establish any violation of the condition relating to manufacture from imported raw materials. On that basis, the exemption under Notification No. 23/2003-CE was held not to be deniable.

Conclusion: The demand was not sustainable and the assessee was entitled to the exemption; the departmental appeal failed.

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