EOU scrap clearances to DTA may qualify for exemption; nil Basic Customs Duty and no SAD where VAT is paid.

Clearance of scrap by a 100% Export Oriented Unit into the Domestic Tariff Area was treated as eligible for customs and central excise exemption benefits, following the Tribunal's earlier ruling in the same matter. The demand was not sustainable merely because ad hoc Standard Input Output Norms had not been fixed under the Foreign Trade Policy. For DTA clearances, Basic Customs Duty had to be worked out with reference to the duty applicable on import of like goods, including any exemption under the Customs Act; where such like goods were fully and unconditionally exempt, the Basic Customs Duty component was nil. Denial of Special Additional Duty was also unwarranted where VAT on the DTA sale had been paid and exemption conditions were substantially met.

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Issues: Whether duty demand on scrap cleared into the Domestic Tariff Area by a 100% Export Oriented Unit was sustainable, including the availability of benefit of the customs and central excise exemption notifications and the treatment of Basic Customs Duty and Special Additional Duty.

Analysis: The clearance of scrap generated during manufacture and export was held to be covered by the Tribunal's earlier decision in the appellant's own case, and the subsequent departmental decision had also followed that ruling. The demand could not be sustained on the premise that the goods were ineligible for benefit under the Foreign Trade Policy merely because adhoc Standard Input Output Norms had not been fixed. The earlier ruling had concluded that, for DTA clearances, Basic Customs Duty had to be determined with reference to the duty applicable on import of like goods, including any exemption notification under the Customs Act, and where imported like goods were fully and unconditionally exempt, the Basic Customs Duty component would be nil. It had also been held that denial of Special Additional Duty was unsustainable where VAT on the DTA sale had been paid and the relevant exemption conditions stood substantially satisfied. The tribunal accordingly followed the earlier binding view.

Conclusion: The duty demand was not sustainable and the exemption benefit was available to the appellant.

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