Deemed export benefits under Foreign Trade Policy prevail for international bidding supplies, barring denial of terminal excise duty exemption.

Supplies made under an international competitive bidding project financed by a notified multilateral agency were treated as deemed exports under the Foreign Trade Policy, with terminal excise duty exemption flowing from clause 8.3(c) read with Rule 19 of the Central Excise Rules, 2002 and Notification No. 43/2001-C.E. (N.T.). Compliance with Notification No. 12/2012-C.E. was not the governing test for denying that benefit, because the relevant entitlement arose from the Foreign Trade Policy regime and the Rule 19 notification framework. On that basis, the denial of terminal excise duty exemption for the transformer supplies was unsustainable.

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Issues: Whether supplies made under an international competitive bidding project financed by a notified multilateral agency qualified as deemed exports under the Foreign Trade Policy and, if so, whether exemption from terminal excise duty could be denied for non-compliance with Notification No. 12/2012-C.E. despite compliance with the Foreign Trade Policy and Rule 19 of the Central Excise Rules, 2002.

Analysis: The entitlement to deemed export status was traced to clause 8.2(d)(i) of the Foreign Trade Policy, 2009-2014, and the corresponding benefit under clause 8.3(c) included exemption from terminal excise duty for supplies against international competitive bidding. On that footing, compliance with the conditions of Notification No. 12/2012-C.E. was not the governing requirement for denial of terminal excise duty exemption, because the relevant legal basis was the Foreign Trade Policy read with Rule 19 of the Central Excise Rules, 2002 and Notification No. 43/2001-C.E. (N.T.). Once the conditions prescribed under Rule 19 and the notification issued thereunder were satisfied, the benefit attached to the deemed export supplies could not be withheld on the ground relied on in the impugned communication.

Conclusion: The denial of exemption from terminal excise duty was unsustainable, and the petitioner was entitled to the benefit in respect of the transformer supplies.

Ratio Decidendi: Where deemed export status is available under the Foreign Trade Policy on the basis of international competitive bidding, the corresponding terminal excise duty benefit must be determined by the Policy and the Rule 19 regime, and not denied solely for non-fulfilment of an inapplicable excise exemption notification.

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