Export Oriented Unit clearances against foreign exchange were not treated as dutiable domestic sales under the policy framework.

Clearances made by a 100% Export Oriented Unit in the domestic area against foreign exchange remittance under the EXIM Policy were treated as distinct from ordinary domestic clearances, so they were not liable to excise duty equivalent to customs duty under the proviso to Section 3(1) of the Central Excise Act, 1944. The Tribunal's view, supported by earlier decisions on similar foreign exchange-based clearances, was upheld as correctly applying the policy framework governing export-oriented units. The duty demand was therefore not sustainable, and the issue was decided in favour of the assessee.

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Issues: Whether clearances made by a 100% Export Oriented Unit in the domestic area against foreign exchange remittance under the EXIM Policy were liable to excise duty equivalent to customs duty under the proviso to Section 3(1) of the Central Excise Act, 1944.

Analysis: The Tribunal had proceeded on the footing that sale in the domestic area against foreign exchange under para 9.10(b) of the EXIM Policy could not be equated with ordinary domestic clearances and that such sales were covered by the policy framework governing export-oriented units. The Court noted that similar issues had already been resolved in earlier Tribunal decisions dealing with clearances against foreign exchange, and those decisions had been carried in appeal and sustained. In that view, the Tribunal's approach that such clearances were not to be treated as dutiable domestic clearances attracting the duty demand raised by the department was found to be correct.

Conclusion: The issue was decided in favour of the assessee. The demand for excise duty on such clearances was not sustainable.

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