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Issues: Whether clearances by a 100% export oriented unit against Advance Release Orders were exempt from excise duty and additional customs duty, and whether the duty demand, interest and penalties under the Central Excise law could be sustained.
Analysis: The clearances were made against Advance Release Orders under the export-import policy, supported by invoices, licence documents and regular returns. The Tribunal followed its earlier view that domestic procurement against such orders is a substitute for import and must receive the same exemption treatment where the policy and notification so provide. It also relied on the Supreme Court's interpretation that the expression "allowed to be sold in India" in the EOU exemption context is confined to the permitted DTA sale quota, and that supplies made under other policy provisions are not the same as such permitted sales. On that basis, supplies against Advance Release Orders were treated as exempt from excise duty under the relevant notification, and no duty liability survived. In consequence, the demand, interest and penalties could not be upheld.
Conclusion: The duty demand, interest and penalties were unsustainable and the assessee succeeded.
Ratio Decidendi: Supplies by a 100% export oriented unit made under Advance Release Orders, where the policy and exemption notification treat them as outside the permitted DTA sale category, are exempt from excise duty and cannot be subjected to duty demand, interest or penalty on the footing of DTA clearances.
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