Advance licence exemption conditions barred domestic clearance of export-linked goods after duty-free imports under the policy.

Duty-free inputs imported under advance licences were treated as required to be physically incorporated into the export product, and the customs exemption notifications were read with the Foreign Trade Policy on that basis. The policy wording and endorsement conditions indicated that the resultant product was intended for export, including where import occurred after fulfilment of the export obligation. A later policy provision allowing disposal of goods made from duty-free inputs was not treated as altering the notification conditions for the relevant period. On that construction, domestic clearance of the resultant product after availing exemption on the imported raw material was prima facie impermissible, and the Revenue established a case for stay.

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Issues: Whether the respondent, after full discharge of export obligation under advance licences, was entitled to clear the resultant product in the domestic market while retaining the benefit of the customs exemption notifications.

Analysis: The Notifications and the Foreign Trade Policy were read together as requiring duty-free inputs imported under advance licences to be physically incorporated in the export product. The expressions used in the policy and the endorsement conditions in the notifications indicated that the resultant product was meant to be exported, including where import took place after fulfilment of export obligation. The subsequent policy provision permitting disposal of the product manufactured out of duty-free inputs was not treated as altering the textual conditions of the notifications for the period in question. The impugned order was found prima facie unsustainable, including because the Commissioner had relied on an erroneous construction of the notification conditions and on a remand order concerning the advance licences.

Conclusion: The respondent was prima facie not entitled to domestic clearance of the resultant product after availing exemption on the imported raw material, and the Revenue made out a case for stay.

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