Circular No 618/9/2002-Central Excise


Government of India
Ministry of Finance
Department of Revenue
Central Board of Excise & Customs

Subject: Removal of goods by 100% EOU to DTA- Non-levy of duty under Section 3(1) of Central Excise Act, 1944.

I am directed to invite reference to Supreme Court”s judgement in case of SIV Industries v. CCE [2000 (117) E.L.T. 281 (S.C.)] vide which the Apex Court had held that “proviso to Section 3(1) regarding the duty chargeable on goods cleared by EOUs shall be applicable only to sales made in DTA upto 25% of production which are allowed to be sold into India as per provisions of EXIM Policy”. In other words, Hon”ble Court decided that if the goods are “not allowed” to be sold in India, the proviso to Section 3(1) of Central Excise Act, 1944 shall not be applicable. The expression “allowed to be sold” has since been replaced with “brought to any other place” w.e.f. 11-5-2001 vide Section 120 Finance Act, 2001 [14 of 2001].

2. It has come to the notice of the Board that field formations are interpreting the judgement to Apex Court to the effect that if the goods cleared by EOUs are not allowed to be sold into India, the Section 3(1) of the of Central Excise Act, 1944 is not applicable and duty can be demanded under the provisions of Customs Act, 1962 only. Board has taken a serious view of this mis-interpretation. The provisions of the Central Excise Act, 1944 shall apply to all goods manufactured or produced in india for which Section 3 is the charging section. EOU are also situated in india and the chargeability under Central Excise Act is never in doubt. Therefore, it is clarified that prior to 11-5-2001, the clearances from EOUs if not allowed to be sold in India, shall continue to be chargeable to duty under main Section 3(1) of Central Excise Act, 1944. Appropriate action may be taken immediately to safeguard revenue and all pending decisions may be settled accordingly.

3. Receipt of the same may please be acknowledged.

4. Hindi version will follow.

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February 2024