Customs duty on reprocessed returned goods was held unsustainable where domestic clearance duty had been paid.

Customs duty was held not recoverable on goods exported, returned for reprocessing, and later cleared in the domestic market on payment of Central Excise duty. The text applies Indian Rayon Industries to state that, where such goods are finally cleared on duty payment, Customs duty demand does not arise, and applies Vidarbha Vineer Industries to confirm that a pending departmental appeal before the Supreme Court does not dilute the binding force of the earlier ruling. On that basis, the duty demand was treated as unsustainable and the assessee's position prevailed.

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Issues: Whether Customs duty could be recovered on goods returned for reprocessing when they were subsequently cleared on payment of Central Excise duty, and whether the earlier ruling on the same issue had to be followed despite the Department's appeal.

Analysis: The goods were exported, returned for reprocessing, and covered by re-export bonds under Notification No. 158/95-Cus. The duty demand was pursued only because the bond conditions were not complied with. The earlier decision in Indian Rayon Industries had held that when such goods are cleared in the domestic market on payment of duty, Customs duty recovery does not arise. The principle in Vidarbha Vineer Industries was also applied to hold that mere pendency of an appeal before the Supreme Court does not deprive the earlier ruling of its effectiveness, and the Department remains bound by it. Since duty had been paid under Notification No. 94/96, the earlier ruling directly governed the case.

Conclusion: The demand for Customs duty was not sustainable, and the impugned order was set aside in favour of the assessee.

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