Customs exemption under Notification No. 32/97-Cus. not denied merely because drawback and DEPB were availed on duty-free inputs.

Customs duty exemption under Notification No. 32/97-Cus. was held to remain available even where drawback and DEPB benefits had been availed on exports made from duty-free imported inputs. The notification was not conditional on non-availment of drawback or DEPB, and the Drawback Rules and policy clarifications did not by themselves defeat exemption eligibility if the notification's own conditions, including value addition, were met. On the stated facts, the authorities had verified that the value of the duty-free soles was excluded from export value and had sanctioned drawback and DEPB without challenge, so the demand denying exemption could not stand.

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Issues: Whether customs duty exemption under Notification No. 32/97-Cus. could be denied on the ground that drawback and DEPB benefits had been availed on the exports made from duty-free imported inputs.

Analysis: The exemption notification was not made conditional upon non-availment of drawback or DEPB. The Drawback Rules and the policy clarifications relied upon by the Revenue indicated that drawback or DEPB could be denied where exports were made using duty-free inputs, but they did not by themselves extinguish eligibility to the customs exemption if the conditions of the notification, including the stipulated value addition, were satisfied. On the facts, the customs authorities had already verified that the value of the duty-free soles was not included in the export value and had allowed drawback and DEPB, while no challenge had been made to that sanction.

Conclusion: The appellants were entitled to customs duty exemption under Notification No. 32/97-Cus., and the demand denying that exemption could not stand.

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