Duty exemption scheme default without prohibited goods did not justify penalty where duty and interest were paid after export failure.

An importer who availed a duty exemption scheme but later failed to complete the export obligation, paid duty and interest, and cleared the goods for home consumption was not liable to penalty where the goods were not prohibited and were otherwise permissible for import. The stated purpose of import was manufacture and export, and the subsequent non-fulfilment of the export condition arose from commercial difficulties rather than any prohibition on the goods or concealment of facts. On those facts, mere failure to meet the export obligation did not by itself justify penal action, and penalty was not warranted.

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Issues: Whether penalty was warranted where the importer, having availed the duty exemption scheme, paid duty and interest and cleared the goods for home consumption after failing to meet the export obligation.

Analysis: The imported goods were not prohibited goods and were otherwise permissible for import. The importer had brought the goods with the intention of manufacture and export, but due to commercial difficulties could not fulfil the export obligation and thereafter paid duty and interest. In these circumstances, the failure to complete the export obligation did not justify imposition of penalty.

Conclusion: Penalty was not warranted.

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