Exemption notification interpretation and negligible quantity variance cannot sustain Special Additional Duty demands without actual excess import.

Special Additional Duty under Notification No. 22/99-Cus. was construed by reference to the place from which the sale took place, not the buyer's location, and sales-tax exemption for the transaction did not alter that reading; on that basis, the demand was treated as unsustainable. A further duty demand based only on comparison between sales quantity and imported quantity was not supported where no excess was found at clearance and the discrepancy was negligible, being explainable by weighment variation. The discussion concludes that exemption notifications must be applied according to their express terms and that a notional post-clearance variance, without actual excess import, cannot by itself sustain duty or penalty.

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Issues: (i) Whether the demand of Special Additional Duty under Notification No. 22/99-Cus. dated 28-2-1999 was sustainable when the importer sold the goods from a place different from the place to which the sales were made; (ii) Whether the demand raised on the basis of alleged excess quantity was sustainable.

Issue (i): Whether the demand of Special Additional Duty under Notification No. 22/99-Cus. dated 28-2-1999 was sustainable when the importer sold the goods from a place different from the place to which the sales were made.

Analysis: The proviso to Sl. No. 5 of Notification No. 22/99-Cus. was read as referring to the place from where the sale took place, not the place to which the goods were sold. The demand had been founded on an erroneous understanding that the relevant factor was the buyer's location and not the seller's place of sale. Sales-tax exemptions available for particular transactions did not alter the character of the place of sale for the purpose of the notification.

Conclusion: The demand of Special Additional Duty was unsustainable and was set aside.

Issue (ii): Whether the demand raised on the basis of alleged excess quantity was sustainable.

Analysis: The alleged excess was derived only by comparing the sales quantity with the imported quantity. No excess was found at the time of clearance, and the discrepancy was negligible. The difference was capable of being explained by weighment variation and was treated as notional rather than actual excess import.

Conclusion: The demand based on alleged excess quantity was unsustainable and was set aside.

Final Conclusion: The impugned demand and penalty could not be sustained, and the assessee was granted consequential relief.

Ratio Decidendi: An exemption notification must be applied according to its express terms, and a negligible quantity discrepancy based only on post-clearance comparison cannot sustain a duty demand in the absence of actual excess found at clearance.

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