Duty exemption for export obligation fails where imported raw materials are destroyed before actual utilisation.

Duty exemption under Notification No. 32/97-Cus. depended on actual utilisation of the duty-free imported raw materials for discharge of the export obligation, and also on compliance with the related restrictions on sale, transfer or disposal. The goods reached the factory but were destroyed by fire before being so utilised, so the condition for exemption was not fulfilled. The notification was therefore treated as inapplicable, and the duty foregone was held recoverable. Earlier precedents were distinguished because they involved wording such as goods "to be used" for manufacture, unlike the present requirement of actual utilisation for export obligation.

---

---

Issues: Whether duty foregone under Notification No. 32/97-Cus. was payable when duty-free imported raw materials were destroyed by fire before being utilized for discharge of export obligation.

Analysis: The notification granted exemption subject to the condition that the imported goods be utilized only for the discharge of export obligation and not be sold, loaned, transferred or otherwise used or disposed of. The goods admittedly reached the factory but were destroyed in fire before such utilization. Since the condition of utilization for export obligation was not fulfilled, the exemption could not be sustained. The authority distinguished precedents relied upon by the appellant because those cases turned on wording such as goods "to be used" for manufacture, whereas the present notification specifically required actual utilization for discharge of export obligation.

Conclusion: The duty foregone was rightly demanded and the appeal failed.

---