DTA sale entitlement for waste from export units cannot be restricted by a later non-retrospective policy amendment.

Cotton waste cleared by a 100% Export Oriented Undertaking to the Domestic Tariff Area was treated differently from rejects under the Export and Import Policy. Para 9.9(b) governed DTA sales against the 50% FOB export entitlement, while Para 9.20 separately dealt with scrap, waste and remnants and, during the relevant period, did not require such sales to be counted against that ceiling. A later amendment linking waste to the Para 9.9(b) limit took effect only from 1-4-2001 and was not retrospective, and administrative circulars could not override the then-current policy. On that basis, the waste sales were excluded from the entitlement and the demand and penalty were set aside.

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Issues: Whether cotton waste cleared by a 100% Export Oriented Undertaking to the Domestic Tariff Area was to be counted within the 50% DTA sale entitlement applicable to physical exports, and whether the later amendment to the policy could be applied retrospectively.

Analysis: Para 9.9(b) of the Export and Import Policy permitted DTA sales up to 50% of FOB value of exports, while Para 9.9(a) dealt specifically with rejects and stated that such sales would count against the entitlement under Para 9.9(b). Para 9.20 separately governed scrap, waste and remnants arising from the production process and, during the relevant period, did not state that their sale would be counted against the DTA ceiling. The materials also showed that waste and rejects were distinct concepts. The amendment to Para 9.20, which expressly linked waste to the Para 9.9(b) ceiling, came into force only from 1-4-2001 and was not made retrospective. The Board circular could not override the policy position prevailing during the relevant period, and the Development Commissioner had clarified that waste sales were not to be included in DTA sales permission.

Conclusion: The waste cleared by the assessee was not liable to be included in the 50% DTA sale entitlement for the relevant period, and the demand could not be sustained.

Final Conclusion: The impugned demand and penalty were set aside and the appeal succeeded.

Ratio Decidendi: Where the governing policy separately regulates waste and rejects, a later amendment expressly bringing waste within the DTA ceiling cannot be applied to an earlier period in the absence of retrospective effect.

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