Tribunal Remands Case for Re-Evaluation of Deemed Export Values and Product Similarity in Determining Excise Liabilities
The Customs, Excise, and Service Tax Appellate Tribunal (CESTAT), West Zonal Bench at Ahmedabad, has remanded the case concerning Sun Pharmaceuticals Industries Ltd to the Adjudicating Authority for a fresh evaluation. The pharmaceutical giant was under scrutiny for its Domestic Tariff Area (DTA) sales entitlements and alleged discrepancies in excise duty payments between April 2011 and February 2014.
Sun Pharmaceuticals, a 100% Export Oriented Unit (EOU), was accused of improperly availing concessional duty rates for products sold in the DTA. The Tribunal, comprising Mr. Somesh Arora and Mr. Satendra Vikram Singh, examined whether the Free on Board (FOB) value of deemed exports should be included alongside physical exports to calculate DTA sales entitlement.
In its judgment dated December 26, 2025, the Tribunal acknowledged the pharmaceutical company’s claim that the FOB value of deemed exports should be considered with physical exports, citing previous judicial precedents that support this inclusion. Consequently, the Tribunal has directed the Adjudicating Authority to reassess whether the company exceeded its DTA sales entitlement based on a comprehensive evaluation of both deemed and physical exports.
Additionally, the Tribunal highlighted the necessity for a more detailed adjudication on the similarity of goods cleared in DTA vis-a-vis those exported. It stressed the importance of examining the technical parameters such as composition, use, and trade names to accurately determine product similarity, thereby influencing DTA sales eligibility under the Foreign Trade Policy.
The Tribunal also upheld the invocation of the extended period of limitation, noting that the complexities surrounding the determination of DTA sales entitlement and product similarity were revealed only through an in-depth audit of Sun Pharmaceuticals' records.
The case has been sent back to the Adjudicating Authority for further investigation and reassessment of the central excise duty liability, if applicable, with instructions to consider the Tribunal's observations during the re-evaluation process.
Bottom Line:
Determination of DTA sales entitlement under Foreign Trade Policy requires inclusion of FOB value of deemed exports, adjudication of 'similar goods' based on technical parameters, and compliance with prescribed limits, while extended period of limitation is validly invoked in cases of deeper scrutiny revealing discrepancies.
Statutory provision(s): Customs Valuation (Import of Goods) Rules, 2007, Foreign Trade Policy, 2009-14, Central Excise Act, 1944 Section 11A, Notification No. 23/2003-CE.
