2003 (4) TMI 141 - AT - Central Excise

Summary

Issues Involved:
The issues involved in this case are the denial of exemption on goods sent to export processing zones, applicability of exemption notifications, interpretation of relevant rules and notifications, and the basis for invoking the extended period of limitation.

Denial of Exemption on Goods Sent to Export Processing Zones:
The appellant, engaged in manufacturing air-conditioning machinery, sent units to export-oriented units without duty payment under various Notifications. The issue arose when the department proposed to deny the exemption due to a condition that the final products should not be exempted from duty. The Commissioner confirmed the proposal and imposed a penalty. The appellant relied on a Tribunal decision in a similar case but the Tribunal found that since the products sent were not liable to duty, the exemption would not apply. The Tribunal rejected the contention that there was no exemption due to the goods not being specified, affirming that the notifications clearly exempted the goods.

Applicability of Exemption Notifications:
The appellant also cited another Tribunal decision and argued that the benefit of the exemption should apply. However, the Tribunal differentiated the case, emphasizing that the goods sent to export processing zones were not liable to duty, thus the exemption would not be applicable. The Tribunal highlighted that the notifications specifically granted exemption to goods sent to export processing units, and the exemption was clear for goods, including air-conditioning machines, sent to export-oriented units.

Interpretation of Relevant Rules and Notifications:
The appellant further relied on a different Tribunal decision and contended that the goods sent to export processing zones should be treated differently from goods exported. The Tribunal clarified that sending goods to a 100% export processing zone is a step towards export completion but does not equate to export. By strictly interpreting the notification, the benefit of the exemption would not extend to parts used in manufacturing the machines sent to the export processing zones.

Basis for Invoking the Extended Period of Limitation:
Despite the above issues, the appellant succeeded based on the limitation aspect. The demand for clearances made was within the extended period of limitation, but the appellant argued that the department was aware of the goods sent to export-oriented units as declared in the classification list. The appellant highlighted the procedural requirements under Chapter X, indicating that each clearance could not have occurred without the officer's knowledge. As these aspects were not considered in the impugned order, the extended period of limitation was deemed inapplicable.

In conclusion, the appeal was allowed, the impugned order was set aside, and consequential relief was granted.