LexM/S. VIRLON TEXTILE MILLS LTD. versus COMMISSIONER OF CENTRAL EXCISE, MUMBAI
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A MIS. VIRLON TEXTILE MILLS LTD. f .._ v. COMMISSIONER OF CENTRAL EXCISE, MUMBAI APRIL 17, 2007 B [S.H. KAPADIA AND B. SUDERSHAN REDDY, JJ.] Customs Tariff Act, 1975; CSH 5402.33/Customs Act, 1962; S.12/Central }.- • ' Excise Act, 1944; S. 3(1); Notification No.2195-CE!Export and Import Policy c 1997-2002; Paras 9.9 and 9.JO(b): Levy of customs duty, excise duty and special additional duty-Texturised Polyester Yarn and Dyed Polyester Yarn-Assessee selling against foreign exchange in Domestic Tariff Area (DTA) in terms of para 9.IO(b) of Exim Policy-Applicability of exemption Notification No.2195-CE-Held: Jn terms D of Exim Policy/rules every 100% Export Oriented Unit manufacturing capital goods/finished products from duty free imported raw materials obliged to export its entire production and earn foreign exchange-However, DTA sales is exempted under the rules-Since in the present appeal, law as stood prior '- to I 1.5.2001 is concerned, DTA sales against foreign exchange was also E covered by the proviso to s.3(1) of the 1944 Act-Hence the assessee is entitled to benefit of Notification No.2195-CE-Tribunal erred in relying on para 9.9(b) of Exim Policy for limiting the benefits of exemption under the Notification by imposing a new condition to the effect that the benefit woula be admissible only in respect of 50% of such DTA sales-Since the benefit of the Notification allowed to DTA sales against rupees, DTA sales against F foreign exchange which are at par with physical exports cannot be denied the same benefit and cannot be subjected to a higher duty-Under the '> ' circumstances, the matter is remanded to the Commissioner, Revenue for calculation of the duty afresh accordingly. Assessee is a 100% Export Oriented Unit (EOU) engaged in the G manufacture ofTexturised Polyester Yarn and Dyed Polyester Yarn. The said yarn is solid against foreign exchange by the assessee in Domestic Tariff Area (OTA) subject tc permission given by the competent authority under para ' - ' 9.lO(b) of Export and Import Policy (Exim Policy) 1997-2002. A show cause notice was issued by the Revenue to the assessee demanding differential H 266 VIRLONTEXTJLE MILLS LID.'" COMMNR. OF CENTRAL EXCISE, MUMBAI 267 ~ amount of duty as it was not paying appropriate duties on the goods cleared A .. I as per the permission granted by the authorities; that the assessee had paid Countervailing duty (CVD) @30% on Texturised Polyester Yarn plus Rs. 9 per kg. on Dyed Polyester Yarn cleared under para 9.lO(b) of Exim Policy against foreign excbange. In terms of the show cause notice, on clearance of the said yarns into DTA under para 9.lO(b), assessee, being a 100% EOU, B was required to pay duty of excise equal to the aggregate of duties of customs leviable on such yarns falling under Chapter Sub-Heading (CSH) 5402.33 of ~ _... the Customs Tarriff Act 1975. Since the assessee had failed to pay the duty in respect of clearances of the yarns under para 9.10 (b), it was asked to pay Rs. 33.38 lacs additional amount of duty for certain period falling during 1997-2002. The demand of differential amount of duty had been confirmed by c the Revenue authorities and on appeal by the Tribunal (CECA T) rejecting the contention of the assessee that they were entitled to the benefit of exemption Notification No.2/95-CE dated 4.1.1995. Hence the present appeal filed by the assessee and cross appeal filed by the Revenue. Allowing the appeal filed by the assessee and dismissing the appeal of D the Revenue, the Court '.J HELD: 1.1. The Exim Policy as a rule stated that every 100% EOU was obliged to manufacture or produce from duty free imported raw materials capital goods etc., finished products/articles and as a rule every 100% EOU E was obliged to export its entire production and earn foreign exchange. This was what was called as Physical Exports. However, this rule had certain exceptions. The appeal in question is concerned with DT A sales. As an exception, there existed two types of DT A sales under the Policy, namely, DTA sales against rupee and DT A sales against foreign exchange which was similar to physical exports. [Para 7) [276-E-F] F , . 1.2. The general rule was physical exports and other supplies in DTA was equated to physical exports. This equation was necessary because other supplies in DT A gave certain benefits to the economy like preservation of foreign exchange, import substi
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