Dear Team,
I am also facing the same error that while creating the excise invoice.When selecting pencil icon the deemed export is not getting selected.It is selectiong the Export under bond/lot/No bond.And it is creation the local excise invoice.
I have done following config setting for Deemed Export:
Follow the IMG Path --> Logistics General --> Tax on Goods Movements --> India --> Business Transactions --> Outgoing Excise Invoice --> Maintain Default Excise Groups and Series Groups.
Choose the respective combination of sales area, plant, excise group and series group. Under the tab "Export", you will have 4 options to assign. Choose the required one.Here i have choosen the deemed export Option
Regards
Rajev