Full Judgment
2. The contention of the ld. Counsel for the appellant is that under Notification No. 125/84 "all excisable goods produced and manufactured in a 100% EOU" are exempt from the whole of duty of excise. The only exception to this exemption is under the proviso to the Notification and that exemption is in respect of "goods if allowed to be sold in India." The contention of ld. Counsel is that "goods allowed to be sold in India" are the goods allowed by Development Commissioner to be sold to Domestic Tariff Area in terms of para 9.9 of Exim Policy and not goods supplied under para 9.10. Ld. Counsel has submitted that this position remains settled by the judgment of the Apex Court in the case of SIV Industries Ltd. v. CCE reported in 2000 (117) E.L.T. 281 (S.C.).
It is the ld. Counsel's contention that since supplies in the present case have been made in terms of para 9.10, they do not attract any duty, since those goods are deemed exports. Ld. Counsel emphasised in this context that, in the present case, there is no dispute whatsoever that the goods were supplied to the parties specified in para 9.10 and that payments for the supplies have been received in foreign exchange.
Thus, Counsel's contention is that the occasion for demand of duty did not arise at all in this case, inasmuch as the supplies in question have been accepted as exports by the Development Commissioner.
3. Ld. SDR has taken us to the impugned order and has submitted that, in the present case, the appellant had not followed the procedure with regard to the supplies and has also submitted that supplies in question are sales to Domestic Tariff Area and are liable to payment of duty under Notification No. 2/95 and there is no exemption Notification in respect of supplies under para 9.10.
4. We have perused the records and considered the submissions made by both sides. Under EOU Scheme, Export Oriented Unit can dispose of their produce in 3 ways: A perusal of paras 9.9 and 9.10 of the Exim Policy clearly brings out that the two disposals are very different in character. Para 9.9(a) is in regard to sale of rejects and para 9(b) is in respect of sales to Domestic Tariff Area. Both the sales are described as "subject to payment of appropriate duties." As against this, supplies to DTA under 9.10 are to parties who are otherwise entitled to import the material.
We may read paras : "9.10. The following supplies in DTA shall be counted towards fulfilment of export performance: (a) Supplies effected in DTA in terms of Paragraph 10.2 of the Policy.
(c) Supplies to other EOU/EPZ/EHTP/STP Units provided that such goods are permissible for procurement in terms of paragraph 9.2 of the Policy.
(d) Supplies made to Bonded Warehouses set up under paragraph 11.14 of the Policy.
(e) Supply of goods against special entitlement of duty free import of goods." This para also specifically says that "supplies in DTA shall be counted towards fulfilment of export performance." This para explicitly makes it clear that these supplies are exports and there is no dispute that exports do not attract central excise duty.
5. Revenue's contention is based on Notification No. 2/95. A careful perusal of that Notification makes it clear that the goods covered in the Notification are goods sold to DTA and not the goods supplied under para 9.10. The said Notification specifically refers to the paras of the Policy and para 9.10 is significantly absent. Therefore, supplies made under that para are not governed by Notification No. 2/95 at all and the Commissioner was in error in invoking that Notification for the purpose of demanding excise duty.
6. It has to be also noted that once the Development Commissioner has accepted these sales as satisfying export obligations, the Customs authorities should not take a contrary view that would render export promotion scheme unworkable. Customs and Central Excise exemptions are dovetailed to export promotion policy. Therefore, the same goods cannot be treated as export by export promotion authority and non-export by another governmental authority. In a three legged race for export promotion by the Customs and Export Promotion authority, the two authorities cannot run in opposite directions. Lack of clarity, if any, should be resolved in a manner facilitating the advancement of the policy and not in a manner that defeats public policy.
7. In the light of what is stated above, we are clear in our mind that duty demand is not sustainable. Once duty demand is not sustainable, there is no occasion for penalty also. The impugned order is therefore, set aside and the appeal is allowed with consequential relief, if any, to the appellant. We make it clear that we are not going into the alternate arguments advanced by the appellants since we are satisfied that the demand is contrary to the relevant legal provisions as discussed.