Customs exemption demand fails where the department cannot prove breach of notification conditions or wrongful availment of credit.

Customs duty demand based on an alleged breach of Notification No. 203/92-Cus was held unsustainable where the goods had already been cleared duty-free on the importer's declaration. The department was required to prove by evidence that the notification condition was breached and that Modvat credit had in fact been availed of, but it failed to do so. A demand cannot be supported merely because the importer did not produce evidence; once exemption has been granted and clearance allowed, recovery requires proof of the alleged non-compliance. The impugned orders were therefore set aside in favour of the assessee.

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Issues: Whether the demand of customs duty could be sustained on the alleged breach of Notification No. 203/92-Cus after the goods had already been cleared free of duty, when the department failed to establish that Modvat credit had in fact been availed of or that the exemption was wrongly granted.

Analysis: The exemption had already been extended and the goods were cleared without duty on the basis of the importer's declaration. In such a situation, the burden lay on the department to show by evidence that the condition in the notification had been violated and that the declaration was false. The order of confirmation was unsupported by any concrete basis and rested only on the absence of evidence from the importer. The Tribunal also noted that, where the clearance has already been allowed, the department cannot justify recovery without first establishing the alleged non-compliance and the circumstances warranting demand.

Conclusion: The demand was not sustainable, and the impugned orders were set aside in favour of the assessee.

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