Customs demand on export unit clearances failed where excise law applied, limitation expired, and product classification supported exemption.

Duty on clearances by an export oriented unit to the domestic tariff area was held unsustainable under Section 28 of the Customs Act, 1962 because the charging provision for goods manufactured in India lay under the Central Excise Act, 1944, and the Board's interpretation could not justify a customs demand. The demands were also barred by limitation, as the notices covered earlier periods without valid invocation of the extended period. Ferric Oxide was treated as part of the approved product description rather than an intermediate product, so the exemption claim could not be denied on that basis. The appeals therefore succeeded and the duty demands were set aside.

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Issues: (i) Whether duty on clearances by an export oriented unit to the domestic tariff area could be demanded under Section 28 of the Customs Act, 1962 in view of the Board's interpretation of the charging provisions; (ii) Whether the demands were time-barred; (iii) Whether Ferric Oxide cleared by the unit was an intermediate product or a final product for the purpose of the exemption claim.

Issue (i): Whether duty on clearances by an export oriented unit to the domestic tariff area could be demanded under Section 28 of the Customs Act, 1962 in view of the Board's interpretation of the charging provisions.

Analysis: The Board's circular clarified that the levy on goods manufactured in India, including goods cleared by export oriented units, is traceable to the Central Excise Act, 1944 and that resort to the Customs Act, 1962 for such demands was a misinterpretation. In that view, the demand sustained under Section 28 of the Customs Act, 1962 could not be upheld.

Conclusion: The demand under Section 28 of the Customs Act, 1962 was not sustainable and this issue was decided in favour of the assessee.

Issue (ii): Whether the demands were time-barred.

Analysis: The notices covered long prior periods but were issued without invocation of the extended period under the proviso. On the dates and periods stated, the demands were beyond limitation under the applicable provisions governing customs and central excise recovery.

Conclusion: The demands were barred by limitation and this issue was decided in favour of the assessee.

Issue (iii): Whether Ferric Oxide cleared by the unit was an intermediate product or a final product for the purpose of the exemption claim.

Analysis: The approval granted by the Secretariat of Industrial Approvals treated the soft grade Ferric Oxide as a product of the unit, and there was no material to show that the goods cleared were outside the approved final-product description. The characterization as an intermediate product was therefore not accepted.

Conclusion: Ferric Oxide was not treated as an intermediate product for the disputed clearances and this issue was decided in favour of the assessee.

Final Conclusion: The impugned duty demands and the orders confirming them were unsustainable on all the decided issues, so the appeals succeeded.

Ratio Decidendi: Where clearances by an export oriented unit are exigible under the central excise charging scheme, a demand cannot be sustained under Section 28 of the Customs Act, 1962 merely on a contrary field interpretation, and the demand must also withstand the applicable limitation and product-characterization tests.

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