Whether deemed exports considered for computing DTA sale entitlement?

PJ/CASE LAW/2015-16/2562

Case:- NANDANA SYNTHETICS PVT. LTD. VERSUS COMMISSIONER OF C. EX. & S.T., DAMAN

Citation:-2015(315) E.L.T. 454 (Tri.-Ahmd.)

Brief Facts:-This appeal is directed against O-I-A No. KS/350/DAMAN/2006, dated 6-10-2006.

The brief facts that arise for consideration are the appellant herein is engaged in manufacturing of polyester texturized yarn and polyester grey knitted fabrics is a 100% EOU. During the period in question (August 2003 to September 2003), appellant cleared the products manufactured by him out of indigenous raw material discharging 50% of the amount of duty payable. The lower authorities were of the view that appellant could not have done so, as per provisions of paragraph 6.8 of the EXIM Policy, issued a show cause notice which was adjudicated and recovery of differential duty was confirmed alongwith interest and penalties. Appellants appeal before the first appellate authority was also rejected. Hence, the present appeal.

Appellant Contentions:-Ld. Counsel at the outset draws our attention to the provisions of paragraph 6.8 of the EXIM Policy 2002-2007. It is his submission that during the relevant period, appellant had exported the goods and also cleared the goods to various 100% EOU’s. It is his submission that the lower authorities are holding a view that the benefit of paragraph 6.8(b) of the EXIM Policy will be applicable only to ‘physical exports’. He would submit that the issue is no more res integra inasmuch as, in the case of Gandhi Fibers - 2011 (268) E.L.T. 354 (Guj.), this Bench vide Final Order No. A/1187/WZB/AHD/2009 held in the favour of the assessee relying upon judgment of the Apex Court in the case of Virlon Textile Mills Ltd. - 2007 (211) E.L.T. 353 (S.C.). It is his submission that the said judgment of the Tribunal in the case of Gandhi Fibers has been upheld by the Hon’ble High Court of Gujarat as reported at 2011 (268) E.L.T. 354 (Guj.) and an SLP filed by the department has been dismissed by the Apex Court on 2-11-2012. He would submit that decision of the Apex Court is binding and it is also his submission that the judgment of Hon’ble High Court of Gujarat in the case of NBM Industries - 2012 (276) E.L.T. 9 (Guj.) = 2013 (29) S.T.R. (208) (Guj.) has held that refund cannot be denied only on the ground that it was the deemed export and not a physical export. He would also submit that the decision of Hon’ble High Court in the case of Amitex Silk Mills Pvt. Ltd. - 2006 (194) E.L.T. 344 and it has been upheld by the Apex Court as reported at 2010 (254) E.L.T. A98 (S.C.).

Respondent Contentions:-Ld. Departmental Representative on the other hand would submit that the appellant could have sought permission from the DGFT for clearing all these goods into DTA as provided in paragraph 6.8(b) of the EXIM Policy. He would draw our attention to the EXIM Policy and submit that the appellant having not taken permission from the DGFT authority, were precluded from clearing goods into DTA on a concessional duty. He would submit that the decision of the Tribunal in the case of Jumbo Bags Ltd. - 2011 (268) E.L.T. 81 (Tri. - Chennai) clearly states that for calculation of DTA entitlement only the value of “physical exports” needs to be taken into account and the value of the “deemed exports” should not be considered. He would also submit that the judgment of Hon’ble High Court of Madras in the case of BAPL Industries Ltd. - 2007 (211) E.L.T. 23 (Mad.) is also on the same issue.

Reasoning of Judgment:-CESTAT have considered the submissions made at length by both sides and perused the case records. Tribunal also find that the issue involved is whether the appellant is eligible to clear into DTA 50% of their FOB value of exports of deemed exports or not.

It is undisputed that appellant is a 100% EOU during the relevant period. It is also undisputed that appellant was clearing the goods to DTA on payment of duty by considering the FOB value of exports, including the deemed exports value.

CESTAT find that the issue is no more res integra.

CESTAT find that in the case of Gandhi Fibers, this Bench vide order dated 11-6-2009 relying upon the judgment of Virlon Textile Mills Ltd. had allowed the appeal of the assessee holding that assessee is eligible to clear goods to Domestic Tariff Area by taking 50% of the deemed exports value as their eligibility. It is noticed that this judgment of the Tribunal has attained finality in the hands of Apex Court. Since the issue is covered by the judgment of Hon’ble High Court of Gujarat in the case of Gandhi Fibersand as also in the case of NBM Industries and Amitex Silk Mills Pvt. Ltd., we find that the impugned order is incorrect.

Reliance placed by the ld. Departmental Representative on the judgment of the Tribunal in the case of Jumbo Bags Ltd. and the judgment of Hon’ble High Court of Madras in the case of BAPL Industries Ltd. will not carry the case any further, as the Jurisdictional High Court’s decision on the very same issue is a recent one and has been upheld by the Apex Court needs to be followed.

In view of the foregoing, we find that the impugned order is unsustainable and is liable to set aside and we do so.

The impugned order is set aside and the appeal is allowed with consequential relief.

Decision:-Appeal Allowed.

Comment:- The crux of this case is that deemed exports are also considered in calculating the DTA sale entitlement of 50% of the FOB price of the goods exported by 100% EOU. This view is confirmed by the Apex Court in the case of Virlon Textile Mills Ltd. , Amitex Silk Mills Pvt. Ltd. and Gandhi Fibers case.

Prepared by: Hushen Ganodwala

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PJ/CASE LAW/2015-16/2562

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