Deemed export benefit applies to certified domestic supply, and related input exemption cannot be denied under the EOU scheme.

Domestic supplies of diesel generator sets to ONGC, certified under a Project Authority Certificate as a permitted deemed export under the Foreign Trade Policy and made through the prescribed international competitive bidding procedure, were treated as eligible for deemed export benefit. The analysis applies the Board's clarification on deemed exports to hold that the input exemption linked to Notification No. 22/2003-CE, and the corresponding customs notification, cannot be denied merely because the finished goods would otherwise attract nil customs duty if imported. On that reasoning, the impugned order was found unsustainable and set aside, with consequential relief to follow in accordance with law.

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Issues: Whether the appellant was entitled to deemed export benefit for supply of diesel generator sets to ONGC under the Project Authority Certificate, and whether the exemption under Notification No. 22/2003-CE continued to apply to the inputs procured for manufacture of the cleared goods.

Analysis: The appellant's supply was certified under the Project Authority Certificate as falling within paragraph 8.2(f) of the Foreign Trade Policy 2004-09 and was made under the procedure of International Competitive Bidding. The Bench held that the purpose of deemed export provisions is to extend benefit to specified domestic supplies, and relied on the Board's clarification in Circular No. 268/01/2016-CX that EOUs are not to be denied the related input exemption where the clearances answer the statutory category of permitted deemed exports. Applying that clarification mutatis mutandis, the Bench found that the proviso denying exemption on inputs in Notification No. 22/2003-CE and the corresponding customs notification did not defeat the claimed benefit in the present supply.

Conclusion: The appellant was entitled to deemed export benefit and to exemption on the impugned clearance and the related inputs.

Final Conclusion: The impugned order was unsustainable and was set aside, with consequential relief to follow in accordance with law.

Ratio Decidendi: Where a domestic supply is certified as a permitted deemed export under the Foreign Trade Policy and is made through the prescribed bidding procedure, the input exemption attached to the EOU scheme cannot be denied merely because the finished goods otherwise attract nil customs duty if imported.

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