Export-linked manufacturing exemption applies to knitting machines used in the production chain for readymade garments.

Knitting machines imported under the EPCG scheme were treated as eligible for exemption under Notification No. 29/97 because they formed part of the actual manufacturing process for readymade garments meant for export. The fact that the machines produced knitted fabric requiring further processing did not defeat eligibility, since the scheme covered goods used in the manufacturing chain leading to the export product. Following prior decisions on the same issue, the exemption was held available to the importer.

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Issues: Whether knitting machines imported under the EPCG scheme were eligible for exemption under Notification No. 29/97 dated 1-4-1997 for use in the manufacture of readymade garments for export.

Analysis: The imported knitting machines were treated as equipment meant for the actual manufacturing process leading to the final product, namely readymade garments for export. The fact that the machine produced knitted fabric requiring further processing did not disqualify the goods from the exemption, since the scheme contemplated use in the manufacturing chain for export production. Following earlier decisions on the same issue, the exemption was held to be available.

Conclusion: The issue was decided in favour of the assessee. The imported knitting machines were held eligible for exemption under Notification No. 29/97 dated 1-4-1997.

Ratio Decidendi: Goods imported under an export-oriented scheme are entitled to the notified exemption if they are used as part of the actual manufacturing process for the export product, even where the goods themselves do not directly produce the finished export item.

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