SFIS scrip debit counts as duty payment for DTA clearances by a 100% EOU, preserving notification benefits.

Debit of SFIS scrips on clearance of goods by a 100% EOU into the DTA is treated as payment of duty under the governing notifications and the Foreign Trade Policy. Such debit is a recognised mode of discharging duty liability, so the clearances cannot be characterised as nil-duty or exempt merely because duty was paid through scrips. On that basis, the benefit linked to Notification No. 52/2003-Cus. and Notification No. 22/2003-C.E. remains available, and a demand alleging that the goods were not duty paid is unsustainable.

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Issues: Whether duty debited through SFIS scrips on clearance of goods by a 100% EOU into the Domestic Tariff Area constitutes payment of duty for the purpose of availing the benefit of Notification No. 52/2003-Cus. and Notification No. 22/2003-C.E.

Analysis: The applicable levy on clearances by a 100% EOU into India is governed by the proviso to section 3 of the Central Excise Act, 1944, read with the exemption notifications governing duty-free procurement of inputs for export production. The governing notifications and the Foreign Trade Policy permit utilisation of duty credit scrips for discharge of duty liability. The clearance of finished goods to DTA by debit of SFIS scrips therefore operates as a recognised mode of payment of duty and cannot be treated as a nil-duty or exempt clearance so as to deny the benefit attached to the procurement notifications. The prior decisions relied upon on the same issue also support the view that debit of such scrips is payment of duty and not exemption from duty.

Conclusion: Debit of SFIS scrips amounted to payment of duty, and the demand raised on the footing that the clearances were not duty paid was unsustainable.

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