Advance licence compliance and input service credit on exports were treated differently, with remand on factual verification and credit allowed.

Entitlement to duty-free procurement under the advance licence scheme depends on actual fulfilment of the export obligation, and the factual position on procurement, exports and compliance must be verified before any final determination; the issue was remanded for fresh decision. Input service credit used in manufacturing goods that were ultimately exported remains admissible where such goods are not treated as exempted goods, and the contrary reliance on nil-rate classification did not displace that position; the Revenue challenge on this point failed.

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Issues: (i) Whether the assessee had fulfilled the export obligation under the advance licence scheme so as to avail the benefit of duty-free procurement and local disposal of the balance goods; (ii) Whether credit of input services used in the manufacture of goods ultimately exported was available, or whether the exported goods were to be treated as exempted goods.

Issue (i): Whether the assessee had fulfilled the export obligation under the advance licence scheme so as to avail the benefit of duty-free procurement and local disposal of the balance goods.

Analysis: The entitlement to dispose of the material procured under the advance licence depended upon fulfilment of the stipulated export obligation. The factual position regarding the actual quantity procured, the exports made, and the resulting compliance with the scheme required verification from the records.

Conclusion: The matter was remanded to the appellate authority for fresh decision after verification of the facts, and no final finding was recorded on this issue.

Issue (ii): Whether credit of input services used in the manufacture of goods ultimately exported was available, or whether the exported goods were to be treated as exempted goods.

Analysis: The appellate authority's view that exported goods were not to be treated as exempted goods for denial of input service credit was supported by decisions directly covering the issue. The Revenue's reliance on the nil-rate classification was held not to displace that position.

Conclusion: Credit of input services used for the exported goods was held admissible, and the Revenue's challenge failed.

Final Conclusion: The dispute ended with a remand on the export-obligation question and rejection of the Revenue's challenge on input-service credit, leaving the assessee with partial relief.

Ratio Decidendi: Where export goods are not treated as exempted goods on the governing legal position, input service credit used in their manufacture remains available; questions requiring factual verification of export compliance may be remanded for fresh adjudication.

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