DTA clearances by a 100% EOU without prior permission were taxed under the main excise charge, not the proviso.

Goods manufactured by a 100% Export Oriented Unit and cleared to the Domestic Tariff Area without prior permission of the Development Commissioner, for the period before 11.05.2001, were outside the proviso to Section 3(1) of the Central Excise Act, 1944. The operative distinction was between clearances specifically allowed for sale in India under the export-import policy and clearances made without such permission. For the relevant pre-amendment period, duty arose under the main charging provision of Section 3(1), not under the proviso.

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Issues: Whether goods manufactured by a 100% Export Oriented Unit and cleared to the Domestic Tariff Area without permission of the Development Commissioner prior to 11.05.2001 were chargeable under the proviso to Section 3(1) of the Central Excise Act, 1944 or under the main charging provision.

Analysis: The issue was covered by the Supreme Court's interpretation of the pre-amendment and post-amendment framework of Section 3 of the Central Excise Act, 1944. The governing distinction was between clearances specifically permitted by the Development Commissioner for sale in India and clearances made without such permission. For the relevant period, the proviso to Section 3(1) applied only where the goods were allowed to be sold in India in accordance with the export-import policy. Where goods of a 100% EOU were not specifically permitted to be cleared to the DTA, the levy was not attracted under the proviso.

Conclusion: Duty liability for the relevant pre-amendment period arose under Section 3(1) of the Central Excise Act, 1944 and not under the proviso to Section 3(1). The Revenue's challenge therefore failed.

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