Duty demand on imported raw materials fails when the underlying confirmation on final products is set aside.

Duty demand and equal penalty on duty-free imported raw materials used in manufacture of final products cleared in the domestic tariff area could not survive once the earlier order confirming duty on the final products was set aside. The demand on the raw materials depended entirely on that prior confirmation under para 9.10(b) of the Exim Policy 1997-2002; after its setting aside, the basis for treating the clearances as non-export clearances and for fastening duty on the raw materials disappeared. The Revenue accepted this position, and the impugned order was set aside in favour of the assessee.

---

---

Issues: Whether the demand of duty and equal penalty on duty-free imported raw materials used in the manufacture of final products cleared in the domestic tariff area could survive after the order confirming duty on the final products had been set aside.

Analysis: The demand on the imported raw material was founded entirely on the earlier confirmation of duty on the final product cleared in the domestic tariff area against foreign exchange under para 9.10(b) of the Exim Policy 1997-2002. Once the earlier order confirming duty on the final product was set aside, the basis for treating the present clearances as non-export clearances and for fastening duty on the raw material no longer remained. The Revenue accepted this position.

Conclusion: The duty demand and penalty on the raw materials could not be sustained and the impugned order was set aside in favour of the assessee.

---