Value-addition condition under customs exemption cannot be denied on a mistaken arithmetical comparison of export value and imported inputs.

Notification No. 32/97-Cus. was considered in the context of garments manufactured from duty-free raw materials supplied by foreign buyers, with exemption depending on satisfaction of the prescribed value-addition condition. The documentary record showed that the FOB value, properly computed, exceeded the CIF value of the imported fabrics, and foreign exchange realisation was evidenced. The apparent shortfall arose from an arithmetical error and from overlooking the exporter's declaration that the imported raw material value was excluded from the FOB figure. On that basis, the value-addition condition was treated as satisfied and exemption could not be denied.

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Issues: Whether the benefit of Notification No. 32/97-Cus. was available to the importer when the exported garments were claimed to have satisfied the prescribed value-addition condition.

Analysis: The imported raw materials were received free of cost from the foreign buyers and the exports were made after manufacturing garments out of those materials. The dispute turned on the computation of FOB value vis-a -vis the CIF value of the imported fabrics. The shipping bills reflected job-work charges as FOB value, but they also contained a declaration that the value of the imported raw material was not included in that figure. On the documentary record, the total FOB value exceeded the CIF value of the imported fabrics, and foreign exchange realization was also evidenced. The apparent shortfall noticed by the lower authorities arose from an arithmetical error and from overlooking the exporter's declaration.

Conclusion: The condition relating to value addition under the notification was satisfied, and the denial of exemption was unsustainable.

Final Conclusion: The exemption benefit was held to be admissible and the duty demand could not survive.

Ratio Decidendi: Where the documentary evidence shows that the export value, properly computed, exceeds the value of the duty-free imported inputs and the prescribed notification condition is met, exemption cannot be denied on the basis of a mistaken arithmetical comparison.

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