Actual-use exemption condition defeats duty waiver where imported material was not fully consumed in export manufacture; penalty stay still granted.

An exemption notification requiring actual use of imported material in the manufacture of export goods was treated as condition-specific, and the applicants failed to show a prima facie case for waiver of pre-deposit on the duty demand because the imported polyester filament yarn was not fully used in the export product. The cited authorities were distinguished on the basis of different notification wording. Interim protection was, however, granted in relation to the penalty demand, with the matter balanced on the facts and Revenue's interest. The duty demand remained payable with interest, while stay was confined to penalty.

---

---

Issues: (i) Whether the applicants had made out a prima facie case for waiver of pre-deposit of the duty demand under Notification No. 30/97-Cus.; (ii) Whether a prima facie case was made out for stay of the penalty demand.

Issue (i): Whether the applicants had made out a prima facie case for waiver of pre-deposit of the duty demand under Notification No. 30/97-Cus.

Analysis: The impugned demand arose because the imported polyester filament yarn was not fully used in the export product, and the authorities found that the balance quantity did not satisfy the actual user requirement under the notification. The order distinguished the authorities cited by the applicants because the exemption notifications considered in those decisions used different phraseology, whereas Notification No. 30/97-Cus. was treated as requiring actual use of the material in the manufacture of the export product. On the facts recorded by the lower authorities, the applicants were found not to have complied with that condition for the duty component.

Conclusion: No prima facie case was made out for waiver of the duty demand, and the applicants were directed to deposit the duty with interest.

Issue (ii): Whether a prima facie case was made out for stay of the penalty demand.

Analysis: The order took note of the Tribunal decision relied upon by the applicants in another matter and considered that, at this stage, a prima facie basis existed for granting protection against the penalty component. Balancing the absence of financial hardship against the Revenue's interest, the order granted interim relief only in relation to penalty.

Conclusion: Stay was granted for the penalty demand till disposal of the appeals.

Final Conclusion: The applications succeeded only in part, with interim protection confined to penalty while the duty demand remained payable with interest.

Ratio Decidendi: Where the language of an exemption notification requires actual use of imported material in the manufacture of export goods, a prima facie entitlement to stay against the duty demand is not made out if the material was not so used, though separate interim relief may still be granted on the penalty component on the facts of the case.

---