Deemed exports and exemption conditions under EOU rules must be applied as written, with no extra permission requirement.

An exemption notification for clearances by a 100% EOU to advance licence holders was applied according to its express terms, and no prior permission from the Development Commissioner could be read into it. Supplies disclosed in returns and reflected through advance licence debit entries did not support suppression, so the extended limitation period was not justified. For computation of the 50% FOB-value limit for DTA clearance of waste and scrap, deemed exports to advance licence holders were to be counted with physical exports under the Foreign Trade Policy. The contrary restriction to physical exports alone was rejected, and the demand based on longer limitation also failed where the assessee's conduct was fully disclosed.

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Issues: (i) Whether goods cleared by a 100% EOU to holders of advance licence were entitled to exemption under Serial No. 22 of Notification No. 23/2003-CE without prior permission of the Development Commissioner, and whether the extended period of limitation could be invoked. (ii) Whether, for determining the 50% FOB-value limit for DTA clearance of waste and scrap, deemed exports to advance licence holders had to be included along with physical exports, and whether the demand was barred by limitation.

Issue (i): Whether goods cleared by a 100% EOU to holders of advance licence were entitled to exemption under Serial No. 22 of Notification No. 23/2003-CE without prior permission of the Development Commissioner, and whether the extended period of limitation could be invoked.

Analysis: The exemption notification, read with its condition 11, did not prescribe any requirement of prior permission from the Development Commissioner for clearances to advance licence holders. The Foreign Trade Policy treated such supplies as deemed exports, and the Tribunal relied on the settled principle that a condition not found in the notification cannot be imported into it. The assessee had also disclosed the supplies in returns filed before the Development Commissioner, and the departmental authorities were aware of the clearances through debit entries in the advance licence and advance release orders. On these facts, there was no suppression or misstatement to justify invocation of the extended limitation period.

Conclusion: The denial of exemption was unsustainable, and the demand raised by invoking the extended period of limitation was also unsustainable.

Issue (ii): Whether, for determining the 50% FOB-value limit for DTA clearance of waste and scrap, deemed exports to advance licence holders had to be included along with physical exports, and whether the demand was barred by limitation.

Analysis: Supplies to advance licence holders were treated under the Foreign Trade Policy as deemed exports and were to be taken into account for the purpose of export-related computation. The Tribunal followed the settled view that deemed exports stand on par with physical exports for this purpose, and that the 50% FOB-value limit could not be restricted to physical exports alone. The contrary view was rejected as inconsistent with the binding jurisdictional precedent. Since the assessee's understanding was supported by multiple decisions, the claim of wilful suppression also failed and the longer limitation period could not be sustained.

Conclusion: Deemed exports were required to be included in the FOB-value computation, and the demand was time-barred.

Final Conclusion: The impugned orders were set aside and the appeals were allowed on both merits and limitation.

Ratio Decidendi: An exemption notification must be applied according to its express conditions, without importing an unprescribed requirement, and deemed exports under the Foreign Trade Policy are to be treated as exports for the relevant export-based computation, including limitation consequences where the facts were fully disclosed.

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