Debonding of export oriented unit goods to domestic market attracts duty under the proviso, not the normal excise rate.

Goods manufactured in a 100% export oriented unit and cleared to the domestic tariff area on debonding were treated as chargeable under the proviso to Section 3, on the basis that the scheme, circulars and notifications linked such clearances to duty equivalent to customs on like imported goods. The clearance on debonding did not alter the duty character of the goods, and the Development Commissioner's role was limited to verifying compliance with scheme conditions. Exit from the export scheme without fulfilling export obligations did not attract the ordinary domestic excise rate.

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Issues: Whether excise duty on goods manufactured in a 100% export oriented unit and cleared to the domestic tariff area on debonding was chargeable under the main provision of Section 3 of the Central Excises and Salt Act, 1944 or under the proviso to Section 3.

Analysis: The unit had been operating under the export oriented unit scheme and, on withdrawal, the relevant governmental communications required payment of customs and excise duties as a condition precedent to debonding. The scheme, the Board's circulars and the related notifications treated goods produced in such a unit and cleared to the domestic tariff area as goods chargeable at a rate equivalent to the customs duties on like imported goods. The clearance on debonding did not change the character of the goods for duty purposes. The Development Commissioner's role was treated as one of verification of compliance with the scheme conditions, not as the source of a different charging regime. The fact that the unit exited the scheme without meeting export obligation did not justify application of the ordinary domestic excise rate.

Conclusion: Duty on the goods was payable under the proviso to Section 3 of the Central Excises and Salt Act, 1944, and the assessee's contention for levy under the main provision failed.

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