Advance licence duty exemption cannot be denied for lower actual consumption where exports were completed and hardship was shown.

Duty-free imports under an advance licence cannot be denied merely because the actual inputs consumed in exported goods were lower than the Standard Input Output Norm. The notification governing such imports did not permit Customs to reopen the licence conditions or demand duty on the alleged balance inputs once the goods were manufactured and exported. On the facts, the importer established a strong prima facie case, and insisting on pre-deposit in those circumstances would cause undue hardship. The pre-deposit direction was therefore set aside, and the appeal was allowed to proceed on furnishing of security.

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Issues: Whether, on the facts, the Customs Authorities could deny exemption and insist on pre-deposit on the ground that the inputs imported under an advance licence were not fully consumed in the exported goods, and whether such insistence would cause undue hardship.

Analysis: The advance licence had been issued under the relevant export-import policy and the imports were made in terms of the notification governing duty-free import against such licence. The imported inputs were used in manufacture and the finished goods were exported, while the dispute arose only because the actual consumption was lower than the norm prescribed under the SION. The notification did not provide for denial of exemption or levy of duty merely because the inputs actually consumed were less than the norm, and there was no accounting provision in the notification enabling the Customs Authorities to re-open the licence conditions. On the facts, a strong prima facie case was made out, and requiring pre-deposit in such circumstances would cause undue hardship.

Conclusion: The Customs Authorities could not go behind the advance licence to demand duty on the alleged balance inputs, and the order directing pre-deposit was liable to be set aside in favour of the petitioners.

Final Conclusion: The petition was allowed, the Tribunal's pre-deposit order was set aside, and the appeal was permitted to proceed upon furnishing of security.

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