Prospective operation of exemption amendments and absence of suppression barred extended limitation for EOU-related duty demand.

A substantive amendment to the excise exemption and credit regime for clearances to a Free Trade Zone unit or 100% Export Oriented Unit operates prospectively from 01-03-1992 and does not apply to earlier periods. The appellant could not claim the amended benefit for the disputed pre-amendment clearances. On limitation, the extended period under the proviso to section 11A was unavailable because the prevailing view before the Larger Bench ruling supported the appellant, so non-payment could not be treated as suppression or wilful evasion. The demand was therefore time-barred, and recovery could not be sustained on the extended limitation basis.

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Issues: (i) whether the amendment extending the benefit of exemption/concession to goods cleared to a 100% Export Oriented Unit operated retrospectively or only prospectively; and (ii) whether the demand was saved by the extended period of limitation under the proviso to section 11A.

Issue (i): whether the amendment extending the benefit of exemption/concession to goods cleared to a 100% Export Oriented Unit operated retrospectively or only prospectively

Analysis: The exemption regime under Notification No. 217/86-C.E. was amended along with the corresponding excise credit provision by Notification No. 4/92-C.E. (N.T.) and Notification No. 33/92-C.E., both dated 01-03-1992. The amendment was treated as a substantive change creating an exception for clearances to a Free Trade Zone unit or a 100% Export Oriented Unit. A substantive amendment of this nature was held to operate only from its date of commencement and not to govern periods anterior to 01-03-1992.

Conclusion: The amendment was prospective only, and the appellant could not claim its benefit for the period in dispute.

Issue (ii): whether the demand was saved by the extended period of limitation under the proviso to section 11A

Analysis: Although the demand failed on merits for the pre-01-03-1992 period, the record showed that prior to the Larger Bench ruling the available view on the issue was in favour of the appellant. On that footing, non-payment of duty on captively used components for goods cleared to a 100% Export Oriented Unit could not be characterised as suppression of facts or wilful contravention with intent to evade duty. The essential conditions for invoking the extended limitation period were therefore absent.

Conclusion: The demand was time-barred and the extended period under the proviso to section 11A was not available to the Revenue.

Final Conclusion: The appeal failed on merits as to the exemption claim for the pre-amendment period, but the demand and penalty were ultimately set aside because limitation was not available to sustain the recovery.

Ratio Decidendi: A substantive amendment granting exemption or credit relief for clearances to a 100% Export Oriented Unit operates prospectively, and the extended limitation period cannot be invoked absent suppression of facts or intent to evade duty.

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