Export obligation under advance licence fulfilled, so customs exemption survived and duty demand and penalties failed.

Export obligation under an advance licence was held to be proved on the record through Customs-processed shipping bills, port dues, foreign exchange realisation, verified export documents, and supporting gate passes and bills of lading. The contrary allegation that only part of the goods was exported was rejected as unsupported, and the finding of diversion to the local market did not survive. Once the export obligation stood fulfilled, the imported replenishment material remained entitled to the exemption notification, and the basis for duty demand, confiscation, and penalties fell away.

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Issues: Whether the appellants had fulfilled the export obligation so as to remain entitled to the benefit of exemption from duty on the imported copper wire bars and nickel cathodes, and whether the duty demand and penalties could therefore be sustained.

Analysis: The record showed shipment of 695 MTs of cupro nickel fittings under the shipping bills processed and examined by Customs, payment of wharfage and other port dues on that quantity, receipt of foreign exchange against the exports, verification of export documents, and supporting material such as gate passes and bills of lading. The allegation that the exports were limited to 180 MTs was rejected as unsupported, and the finding that the goods were diverted to the local market did not survive in light of the evidence accepted as proving manufacture and export. Once the export obligation stood fulfilled, the imported replenishment material could not be denied the exemption merely because it was later disposed of, and the basis for confiscation and penalty also fell away.

Conclusion: The appellants were entitled to the benefit of the exemption notification, and the duty demand and penalties were unsustainable.

Ratio Decidendi: Where export obligation under an advance licence is proved to have been fulfilled, the subsequent disposal of replenishment imports does not by itself defeat the customs exemption or sustain duty demand and penalties.

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