Duty on DTA clearances by an export oriented unit under Notification No. 8/97 upheld for lack of evidence of imported input use.

Duty on domestic tariff area clearances by a 100% export oriented unit was payable under Notification No. 8/97 where the manufacturer had discharged duty accordingly and maintained separate records for goods made from imported and indigenous inputs. The Revenue's attempt to apply Notification No. 2/95 on the basis that the clearances were from imported raw material failed because no tangible evidence showed diversion or use of imported inputs in the disputed clearances. On that factual record, the duty payment under Notification No. 8/97 was accepted as correct and the Revenue's appeal was rejected.

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Issues: Whether the duty liability on domestic tariff area clearances made by a 100% export oriented unit was correctly discharged under Notification No. 8/97, or whether duty was payable under Notification No. 2/95 on the footing that the clearances were made from imported inputs.

Analysis: The respondents were a 100% export oriented unit manufacturing cotton yarn under Chapter heading 52 of the Central Excise Tariff Act, 1985 and had cleared goods into the domestic tariff area after paying duty under Notification No. 8/97. The Revenue's plea that the goods were liable to duty under Notification No. 2/95 because they were made from imported raw material was not supported by tangible evidence. Separate records maintained for goods manufactured from imported and indigenous raw materials had been accepted by the appellate authority, and no material was produced to show diversion or use of imported inputs in the disputed clearances.

Conclusion: The duty paid by the respondents under Notification No. 8/97 was held to be correct, the Revenue failed to establish its case, and the appeal was rejected.

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