EOU foreign exchange clearances and excise duty exemption under the Exim Policy were upheld under Notification No. 125/84-C.E.

Clearances by a 100% Export Oriented Unit against foreign exchange under para 9.10(b) of the Exim Policy were treated as distinct from goods merely "allowed to be sold in India" within the DTA quota, and therefore outside the excise liability attracted by the proviso to Section 3(1). The Tribunal also applied Notification No. 125/84-C.E. to such EOU clearances and held that the later departmental interpretation did not override that exemption on the facts considered. On that basis, the demanded central excise duty was not payable on the foreign exchange clearances.

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Issues: Whether clearances made by a 100% Export Oriented Unit in terms of para 9.10(b) of the Exim Policy against foreign exchange were liable to central excise duty, and whether Notification No. 125/84-C.E. exempted such clearances from duty.

Analysis: The Tribunal examined the scheme governing 100% EOUs, the expression "allowed to be sold in India" as interpreted by the Supreme Court, the departmental circular, and the exemption notification applicable to goods manufactured in an EOU. It held that supplies against foreign exchange under para 9.10(b) were not the same as sales counted within the DTA quota of goods "allowed to be sold" and therefore could not be equated with the clearances attracting duty under the proviso to Section 3(1). It further followed the view that Notification No. 125/84-C.E. continued to govern such EOU clearances and that the later departmental understanding did not displace that exemption in the facts of the case.

Conclusion: The clearances against foreign exchange by the 100% EOU were held not liable to the demanded central excise duty, and the assessee succeeded while the Revenue's challenge failed.

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