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2009 (3) TMI 524 - AT - CustomsEOU - The assessees are 100% EOU engaged in the manufacture of grey cotton fibres. Proceedings were initiated by way of show cause notice dated 9-9-2002 demanding duty of Rs. 1, 23, 99, 528/- on the ground that clearances made by the assessees were not exempted from payment of Basic Customs Duty Countervailing Duty (CVD) and Special Additional Duty (SAD) till the issue of Notification No. 28/2001-C.E. dt. 16-5-2001 and therefore duty should have been paid for the period from 1-4-2001 to 16-5-2001. Held that - Clearance by EOU to DFRC holders treated as goods not allowed to be sold in India as per Tribunal decision of Maruti Cottex Ltd. v. CCE 2008 -TMI - 53645 - CESTAT SOUTH ZONAL BENCH BANGALORE. Supply of goods to DFRC holders considered as deemed exports as per EXIM Policy. Demand not sustainable.
Issues:
1. Interpretation of Notification No. 125/84-C.E. for exemption of goods produced by a 100% EOU. 2. Applicability of duty exemptions for clearances to DFRC holders. 3. Assessment of duty liability for the period from 1-4-2001 to 31-7-2002. Analysis: The case involved a dispute regarding the duty liability of a 100% EOU engaged in the manufacture of grey cotton fibers for clearances made to DFRC holders. The primary issue revolved around the interpretation of Notification No. 125/84-C.E., which exempts goods produced by EOUs from excise duty unless allowed to be sold in India. The assessees contended that their clearances to DFRC holders did not fall under the category of goods allowed to be sold in India, thus qualifying for the exemption. They relied on precedents such as Maruti Cottex Ltd. v. CCE to support their argument. The Tribunal upheld this view, emphasizing that clearances to DFRC holders were deemed as "goods not allowed to be sold in India," making them eligible for the exemption under the said notification. Furthermore, the Tribunal considered the applicability of duty exemptions for the period in question, specifically from 1-4-2001 to 31-7-2002. The revenue contended that the assessees were not exempted from certain duties due to the timing of relevant notifications. However, the Tribunal found that the clearances in question were covered by the exemption under Notification No. 125/84-C.E., thereby rejecting the revenue's demand for duty payment. The Tribunal also highlighted the policy provisions regarding deemed exports to DFRC holders, reinforcing the assessees' eligibility for duty exemption and potential refund under Para 10.3 of the Policy. Ultimately, the Tribunal ruled in favor of the assessee, allowing their appeal and dismissing the revenue's appeal as infructuous. The decision rested on the finding that the duty demand was not sustainable given the nature of the clearances and the applicable exemptions. Consequently, the question of the extended period for duty liability did not arise, leading to the rejection of the revenue's appeal. The operative portion of the order was pronounced accordingly in open court, concluding the matter in favor of the assessees based on the interpretation of relevant legal provisions and precedents. This detailed analysis of the judgment provides a comprehensive understanding of the legal issues, arguments presented, and the Tribunal's decision in this case.
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