Re-export permission for uninstalled duty-free capital goods bars duty recovery, confiscation, and penalty where non-installation was unforeseen.

Duty-free capital goods imported by a 100% Export Oriented Unit were not treated as having breached exemption conditions where the machinery remained uninstalled because of unforeseen business circumstances and the competent Development Commissioner had permitted re-export. On that basis, the demand for customs duty, confiscation, interest, and penalty was held unsustainable, since non-use alone did not justify recovery when the export obligation had been completed and the policy allowed re-export. The impugned order was set aside and re-export permission was directed to be considered in light of the Development Commissioner's approval.

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Issues: Whether customs duty, confiscation, interest, and penalty were sustainable on capital goods imported duty-free by a 100% Export Oriented Unit when the machinery could not be installed for business reasons and the Development Commissioner had permitted re-export.

Analysis: The imported machinery remained uninstalled because of changed market conditions and the decision not to proceed with installation was found to be due to unforeseen circumstances rather than any deliberate breach of the exemption conditions. The Development Commissioner had granted permission for re-export under the Foreign Trade Policy and had taken a definite view on the matter. In that situation, the demand of duty and consequential confiscation and penalty could not be sustained merely because the machinery had not been put to use, especially when the export obligation had been completed and the policy permitted re-export.

Conclusion: The duty demand, confiscation, interest, and penalty were not sustainable and the appeal was allowed.

Final Conclusion: The impugned order was set aside, and the Revenue was directed to consider the request for re-export in light of the Development Commissioner's permission.

Ratio Decidendi: Where non-installation of duty-free imported capital goods by a 100% Export Oriented Unit is due to unforeseen business circumstances and the competent Development Commissioner grants re-export permission, the exemption cannot be treated as violated so as to justify duty recovery and consequential penal action.

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