EOU DTA clearances retained exemption; later explanatory amendment could not retrospectively withdraw the benefit.

A 100% Export Oriented Unit making clearances into the domestic tariff area was entitled to exemption under Notification No. 3/2001-C.E. for the relevant period, because the exemption had to be determined by the notification text in force at that time. Earlier Delhi and Gujarat High Court rulings had already held that such DTA clearances were not to be subjected to the countervailing duty treatment asserted by the department, and those rulings had also invalidated the contrary Board circular. The later explanatory amendment in Notification No. 48/2001-C.E. was treated only as prospective clarification and could not retrospectively defeat the exemption. The appeal was allowed in favour of the assessee.

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Issues: Whether a 100% Export Oriented Unit clearing goods into the domestic tariff area was entitled to exemption under Notification No. 3/2001-C.E. dated 01.03.2001, and whether the explanatory amendment introduced by Notification No. 48/2001-C.E. dated 10.10.2001 could be applied retrospectively to deny the exemption.

Analysis: The exemption issue was governed by the language of the notification as it stood during the relevant period. The earlier decisions of the Delhi High Court in Plastic Processors and the Gujarat High Court in Lucky Star International had already interpreted the predecessor notification and held that DTA clearances by a 100% EOU were not liable to be burdened with countervailing duty in the manner asserted by the department. Those decisions had also quashed the Board circular that proceeded on the contrary basis. The explanatory amendment issued later in October 2001 could only be treated as a clarification for the future and could not be read as having retrospective effect so as to override the law already declared.

Conclusion: The exemption was available to the assessee for the relevant period, and the retrospective denial of that benefit by reference to the later explanation was rejected. The appeal was allowed in favour of the assessee.

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