Board Circular Supports Exemption for EOU Clearances and Defeats a Time-Barred Duty Demand

A Board circular was read with Notification No. 55/91 to extend exemption from additional duty to cotton yarn and cotton waste cleared by a 100% export oriented unit to the Domestic Tariff Area, and the Revenue was treated as bound by that interpretation; the duty demand on merits was therefore unsustainable. The demand was also held time-barred because it was raised long after the relevant clearances and no basis for invoking the extended limitation period was shown in the demand notice. On both merits and limitation, the exemption was sustained and the duty demand was set aside.

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Issues: (i) Whether 100% export oriented units clearing cotton yarn and cotton waste to the Domestic Tariff Area were entitled to exemption from additional duty under Notification No. 55/91 dated 25.07.1991 read with the Board circular. (ii) Whether the demand raised for the disputed period was barred by limitation.

Issue (i): Whether 100% export oriented units clearing cotton yarn and cotton waste to the Domestic Tariff Area were entitled to exemption from additional duty under Notification No. 55/91 dated 25.07.1991 read with the Board circular.

Analysis: The goods were admittedly cleared by a 100% export oriented unit for Domestic Tariff Area sale during the relevant period. Notification No. 55/91 granted exemption from additional duty to excisable goods produced by such units, and the Board circular supported that interpretation. The Revenue was bound by the circular and could not adopt a contrary stand.

Conclusion: The exemption was rightly extended to the assessee and the demand on merits was unsustainable.

Issue (ii): Whether the demand raised for the disputed period was barred by limitation.

Analysis: The demand was first raised long after the relevant clearances, and no basis for invoking the extended period was shown in the demand communication. On the admitted dates, the claim was beyond the permissible period.

Conclusion: The demand was time-barred.

Final Conclusion: The Revenue failed on both merits and limitation, so the assessee's exemption was sustained and the duty demand was set aside.

Ratio Decidendi: Where a Board circular supports the plain scope of an exemption notification applicable to 100% export oriented units, the Revenue is bound by that interpretation, and a delayed demand without disclosed grounds for extended limitation cannot be sustained.

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