Strict compliance with customs exemption conditions determines duty liability on imported goods left unused and later claimed as unfit.

Imported raw materials and capital goods cleared under an exemption notification remained liable to customs duty where the conditions for use in export manufacture were not complied with within the stipulated period. The notification required strict adherence, and a belated request for extension, without a satisfactory explanation for non-use, did not create any right to retain the exemption or transfer the goods freely to another warehouse or unit. A plea that the goods had become damaged, contaminated, or microbiologically unfit was rejected because the deterioration resulted from the importer's own failure to use them in time. Reliance on relinquishment of title under Section 23(2) of the Customs Act was also found inapplicable.

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Issues: Whether the demand of customs duty was sustainable for imported raw materials and capital goods that were not utilised in accordance with the conditions of the exemption notification; whether the appellant could avoid duty on the plea that some materials were damaged, contaminated, or microbiologically unfit; and whether Section 23(2) of the Customs Act entitled the appellant to rely on relinquishment of title.

Issue (i): Whether the demand of customs duty was sustainable for imported raw materials and capital goods that were not utilised in accordance with the conditions of the exemption notification.

Analysis: The exemption was granted subject to use of the imported goods for manufacture of export goods within the stipulated period and in accordance with the notification conditions. The imported goods were not utilised within time, the request for extension was belated, and no satisfactory explanation was given for the failure to use the goods for the intended export manufacture. The notification did not confer any general right to transfer the goods to another warehouse or unit without compliance with the governing conditions.

Conclusion: The demand of duty was rightly confirmed and is sustained.

Issue (ii): Whether the appellant could avoid duty on the plea that some materials were damaged, contaminated, or microbiologically unfit, and whether Section 23(2) of the Customs Act entitled the appellant to rely on relinquishment of title.

Analysis: The materials were found to have deteriorated because they were not used for a long time, and the failure to use them was attributed to the appellant's own negligence or conscious decision. The plea based on damaged or unfit goods was therefore not accepted. The contention founded on relinquishment of title under Section 23(2) was also held irrelevant, as no relinquishment had in fact been made and the issue before the Tribunal was only the validity of the duty demand.

Conclusion: The appellant was not entitled to relief on either ground.

Final Conclusion: The appeal failed in full, and the customs duty demand confirmed by the Commissioner was upheld.

Ratio Decidendi: Exemption from customs duty must be strictly complied with, and where imported goods are not used within the stipulated conditions and period, duty becomes payable; a belated plea of damage or relinquishment of title does not defeat the demand absent actual compliance with the statutory and notification requirements.

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