Advance licence exemption depends on import and clearance conditions; post-import duty and interest were limited on recomputation.

Failure to fulfil an export obligation under an advance licence did not by itself exclude exemption benefits on home consumption clearance; duty for breach of a post-import condition had to be worked out at the rate applicable on the date of import, while also considering any exemption notification in force on the date of clearance. On the facts recorded, the imported materials had been used in manufacture and the conditions of Notification No. 72/93-Cus. were satisfied, so the exemption remained available. Interest on the duty demand was also to be recalculated at 15% under the revised policy rate, with the matter limited to recomputation of duty and interest.

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Issues: (i) Whether the importer, having failed to fulfil the export obligation under the advance licence scheme, was entitled to claim the benefit of Notification No. 72/93-Cus. on clearance of the goods for home consumption. (ii) Whether interest payable on the duty demand should be calculated at 15%.

Issue (i): Whether the importer, having failed to fulfil the export obligation under the advance licence scheme, was entitled to claim the benefit of Notification No. 72/93-Cus. on clearance of the goods for home consumption.

Analysis: The imported goods were initially exempted under Notification No. 204/92-Cus. against an export obligation, but the obligation could not be fulfilled for reasons beyond control and the goods were used in the manufacture of dumpers cleared domestically. The liability to duty for breach of a post-import condition had to be worked out at the rate applicable on the date of import, subject to any exemption notification in force on the date of clearance. Since the imported materials were actually used in the manufacture of the original equipment and the relevant conditions of Notification No. 72/93-Cus. stood satisfied on the record, the benefit of that notification was available.

Conclusion: The importer was entitled to the benefit of Notification No. 72/93-Cus., and the demand could not be sustained without applying that exemption.

Issue (ii): Whether interest payable on the duty demand should be calculated at 15%.

Analysis: Interest was payable from the date of clearance till payment in terms of the bond, but the applicable rate had subsequently been reduced to 15% under the Exim Policy and was treated as applicable to pending matters.

Conclusion: Interest was to be recalculated at 15%.

Final Conclusion: The appeal succeeded, the impugned order was set aside, the benefit of the exemption notification was extended, the interest claim was restricted to 15%, and the matter was sent back only for computation of duty and interest.

Ratio Decidendi: For failure of a post-import condition, duty is to be determined at the applicable rate on the date of import, but the exemption in force on the date of clearance must also be considered, and the conditions of that exemption must be satisfied.

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