MUMBAI, AUG 19, 2014: THE appellants are 100% EOUs engaged in the manufacture of cotton yarn and during the process of manufacture, cotton waste arises.

As per the EXIM policy and the guidelines issued in this regard the appellants are entitled to sell 50% of the value of their exports during a financial year into DTA in the subsequent financial year.

In the present case, impugned duty demands have been confirmed by the CCE, Kolhapur on the sole basis that the permission for DTA clearance is valid from the date of issue of letter of the Development Commissioner and prior to issue of such letter, there is no entitlement to the appellants for sale into DTA.

The short question before the Bench was-When the entitlement accrues on the first day of a financial year based on the export performance and NFEP during the preceding financial year, can it be said that merely because the entitlement was formalized by a letter of the Development Commissioner later, the benefit should be denied during the period of interregnum between the first day of financial year and the date of issue of permission by the Development Commissioner.

The Bench observed –

++ The right to sell in the DTA accrues to the appellant on the first day of a financial year. That accrued/vested right cannot be taken away merely because there was a delay in issuing the letter of permission by the Development Commissioner. Such an interpretation would make a mockery of the provisions of EXIM policy and the benefits granted to the exporter under the said policy.

++ During the interregnum, there was a permission available which was valid, based on the preceding year's export performance and the clearance made by the appellant was within these limits specified. Therefore, it cannot be said that the appellant did not have the requisite permission for sale in to DTA.

Holding that the orders passed by the CCE, Kolhapur confirming duty demands of Rs.80.94 lakhs and Rs.1.09 crores along with equivalent penalty, interest and personal penalties is not sustainable in law, the same were set aside and the appeals were allowed.

In passing: Any likes for the new section 35F of the CEA, 1944?

(See 2014-TIOL-1527-CESTAT-MUM)