Tribunal sets aside duty demand for FOC exports, citing compliance with Rule 19

The Tribunal ruled in favor of the appellant, setting aside the demand of duty, interest, and penalty imposed for exporting goods on FOC basis without receiving sale proceeds. The Tribunal found that the export was in compliance with Rule 19, as the goods were sent as trade samples with no commercial value and without a stipulated period for receipt of export proceeds. The Tribunal criticized the reliance on an RBI circular not mentioned in the show cause notice and held that duty cannot be imposed in such circumstances.

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Issues:
The issues involved in the present case include demand of duty, interest, and penalty under Section 11AA and Section 25 of Central Excise Rules, 2002 read with Section 11A(1) of the Central Excise Act for goods exported on FOC basis without receipt of sale proceeds.

Summary:

Demand of Duty:
The appellant, a public limited company engaged in manufacturing two-wheelers, exported goods on FOC basis without receiving sale proceeds, leading to a demand of duty amounting to Rs. 5,12,692/-, interest, and penalty. The Commissioner (Appeals) upheld the demand, which was contested by the appellant.

Appellant's Arguments:
The appellant contended that the impugned order did not properly appreciate the facts and law. They argued that the export was in compliance with Rule 19 of Central Excise Rules, 2002 and Notification No. 42/2002-CE(N.T.). The appellant believed they were eligible to avail Cenvat credit and that there was no willful suppression or wrongdoing. They cited relevant legal precedents to support their case.

Department's Response:
The Department reiterated the findings of the impugned order, stating that the export was in violation of procedures and RBI master circulars. They claimed that the appellant did not provide supporting documents to prove the goods were sent as samples or for testing purposes.

Tribunal's Decision:
After considering submissions and evidence, the Tribunal found that the export was on FOC basis without receipt of foreign currency, as permitted under Rule 19. The Tribunal noted that no objection was raised by the Department at the time of export. The export goods were declared as having no commercial value and were sent for promotional purposes as trade samples. Citing a legal precedent, the Tribunal held that the demand for duty cannot be imposed if goods were exported under bond/LUT without a stipulated period for receipt of export proceeds. The Tribunal also found fault with the impugned order for relying on an RBI circular not mentioned in the show cause notice. Consequently, the Tribunal set aside the impugned order, allowing the appeal of the appellant.

Conclusion:
The Tribunal ruled in favor of the appellant, finding the impugned order unsustainable in law and setting it aside with consequential relief, if any, as per law.

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