Broad construction of DEPB yarn entry allows benefit for viscose rayon thread used as embroidery yarn.

DEPB entries are to be construed as incentive provisions and not as strict tariff classifications. Viscose rayon thread exported as two-ply twisted yarn for embroidery was treated as substantially covered by the DEPB entry for viscose yarn, because the scheme was intended to neutralise the incidence of basic customs duty on the import content of the export product. The absence of a separate thread entry did not justify denial of credit on a narrow classification approach. The DEPB benefit was therefore allowable and the denial of credit and penalty were unsustainable.

---

---

Issues: Whether viscose rayon thread exported by the appellant was covered by the DEPB entry for viscose yarn and entitled the appellant to the claimed benefit.

Analysis: The entry in the DEPB schedule was not read as a strict scientific tariff classification but as a broad incentive provision intended to neutralise the incidence of basic customs duty on the import content of the export product. On the material before it, the exported goods were two-ply twisted yarn used for embroidery and thread was treated as yarn subjected to twisting and finishing for a particular use. Since the schedule did not contain a separate entry for thread and the goods were substantially covered by the yarn entry, the benefit could not be denied merely because the Commissioner applied a narrow tariff-based classification.

Conclusion: The thread in question was entitled to the DEPB benefit under the yarn entry, and the denial of credit was /unsustainable.

Final Conclusion: The appeal succeeded and the impugned order denying the DEPB benefit and imposing penalty was set aside.

Ratio Decidendi: A DEPB entry framed as an incentive provision must be construed broadly to give effect to its object, and goods substantially answering the description in the entry cannot be denied the benefit by importing a strict tariff classification that is inconsistent with the scheme.

---