Duty-free return of surplus raw materials under concessional excise procedure defeats duty demand when prior permission is obtained.

Duty-free clearances to an export oriented unit under Notification No. 22/2003-C.E. remained protected where surplus raw materials were returned to the original supplier with prior departmental permission and in compliance with Rule 6 of the Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2001. The notification's Condition (6) required adherence to that procedure, and once it was satisfied, Condition (8) was treated as inapplicable. On that basis, the duty demand was not sustainable.

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Issues: Whether duty demand could be sustained on an export oriented unit that received raw materials duty free under Notification No. 22/2003-C.E. and, with prior departmental permission, returned surplus raw materials to the original supplier in accordance with Rule 6 of the Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2001.

Analysis: The duty-free clearance was subject to Condition (6) of the notification, which required compliance with the procedure under the 2001 Rules. Rule 6 permitted return of surplus raw materials duty free to the original supplier. The return in question was made with prior departmental permission and in accordance with the notification conditions and the prescribed procedure. Condition (8) was held to be inapplicable where Condition (6) had been complied with.

Conclusion: The duty demand was not sustainable and the assessee succeeded.

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