Deemed exports under EXIM Policy counted in FOB base for EOU DTA entitlement under excise notification.

DTA clearances by a 100% Export-Oriented Undertaking made against foreign exchange were treated as deemed exports under Paragraph 9.10 of the EXIM Policy 1997-2002, and therefore had to be included in computing the FOB-value base for the 50% DTA entitlement under Notification No. 2/95-C.E. The provisions operated on different planes, but the policy expressly counted such foreign-exchange DTA supplies as export performance for entitlement purposes. On that basis, the Tribunal accepted that the Revenue could not confine the computation to physical exports alone, and the duty demand on the disputed clearances failed.

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Issues: Whether clearances made by a 100% Export-Oriented Undertaking into the Domestic Tariff Area against foreign exchange under Paragraph 9.10 of the EXIM Policy 1997-2002 could be counted as exports for the purpose of the 50% FOB-value limit under Notification No. 2/95-C.E.

Analysis: Notification No. 2/95-C.E. granted concessional excise duty for goods produced in a 100% Export-Oriented Undertaking and sold in India in accordance with Paragraphs 9.9 and 9.20 of the EXIM Policy. Paragraph 9.9(b) permitted DTA sales up to 50% of the FOB value of exports, while Paragraph 9.10 treated supplies made into DTA against payment in foreign exchange as counting towards export performance. The Tribunal held that these provisions operated on different planes, and that DTA supplies against foreign exchange were to be treated as deemed exports for the purpose of computing the entitlement under Paragraph 9.9. The Tribunal also followed earlier decisions holding that once the Development Commissioner had granted permission for DTA sale up to a fixed value, the Revenue could not deny the benefit by restricting the base to physical exports alone.

Conclusion: Such DTA clearances against foreign exchange were liable to be treated as exports for the purpose of the notification and the 50% FOB-value limit, and the demand of duty could not be sustained.

Final Conclusion: The appeal succeeded and the assessee retained the benefit of concessional duty on the disputed DTA clearances.

Ratio Decidendi: Where the policy expressly treats DTA supplies against foreign exchange as export performance, those supplies must be included in computing the FOB-value base for eligibility under a notification linked to Paragraph 9.9 of the EXIM Policy.

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