The Customs, Excises, Service Taxes Appellate Tribunal (CESTAT), Mumbai Bench ruled that once the export obligation is fulfilled, manufacturers can not be constrained to clear particular products in DTA in proportion to the export of specific products.
The appellants, M/s. Axiom Cordages Ltd. is an EOU manufacturer and exporters HDPE/LDPE/PP Ropes and Yarn. The appellants have achieved positive NFE and there is no dispute on this count. The appellants have also cleared Yarn and Ropes in DTA.
On the basis of CAG audit conducted on the records of the appellants, the department opined that in terms of Para 6.8[a] of the Foreign Trade Policy, built into condition 2 of the notification number 23/2003-CE dated 31-03-2003, EOUs are allowed to clear their finished goods into DTA, involving value up to 50% of the FOB value of exports subject to fulfillment of positive NFE on payment of concessional duties of excise; within this entitlement of DTA sale, the EOU may sell goods which are exported or to be exported by them. EOUs which are manufacturing and exporting more than one product may sell any of these products into DTA up to 90% of the FOB value of exports of the specific products, subject to the condition that total DTA sale does not exceed the overall entitlement of 50% of the FOB value of exports.
It was alleged that the appellants have availed concessional duties of Central excise, on goods cleared in DTA, in excess of the permitted 90% of the FOB value of the exports, in contravention of Para 6.8[a] of the Foreign Trade Policy and condition of the notification number 23/2003-CE dated 31-03-2003; the appellants, during the relevant periods, exported the yarn valued at `68,68,303/- and cleared the same yarn valued at `4,70,37,94,080/- into DTA. This was much in excess of the prescribed limits of 90% of the FOB value of exported yarn and thus in clear contravention of the Para 6.8[a] of the Foreign Trade Policy and condition 2 of the Notification. Accordingly, Show cause Notices were issued and duty was confirmed.
The issue raised was whether the appellant has violated the provisions of foreign trade policy 2009-14 as contained in paragraph 6.8 thus making them ineligible for the concessional rate of duty as contained in notification No. 23/2003 CE dated 31.03.2003 and as to whether the department is justified in invoking extended period for the duty demand.
Therefore, the tribunal found that the case is in no way in favor of the Revenue. Moreover, in the instant case, there is no allegation that export obligation has not been fulfilled and positive NFE was not achieved. A close look at the scheme of the EOU gives an understanding that the scheme places the reliance on the value of exports and not the quantities.