Use of Imported Raw Materials Does Not Disqualify Customs Exemption If DTA Goods Are Made from Indigenous Inputs: CESTAT

The Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has ruled that a 100% Export Oriented Unit (EOU) is still eligible for a customs duty exemption on goods sold in the Domestic Tariff Area (DTA), even if it uses imported raw materials for its export production. The key condition, the tribunal held, is that the specific goods being sold in the DTA must be manufactured using wholly indigenous raw materials. The customs department had sought to deny the exemption, arguing that the EOU's overall use of imported inputs disqualified it. However, the CESTAT clarified that the assessment should be made on a product-by-product basis. As long as the EOU can demonstrate that the particular goods cleared for domestic sale were made exclusively from local inputs, the concessional duty benefit applicable to DTA sales remains valid.