Broad nexus test under Target Plus Scheme supported exemption claim and secured waiver of pre-deposit and recovery stay.

In the context of the Target Plus Scheme, the Tribunal considered whether the imported item needed a narrow item-wise nexus with the export product or only a broad nexus with the export product group for exemption under Notification No. 32/2005-Cus. Relying on the High Court view in Essel Mining, it noted that paragraph 3.2.5 of the Handbook of Procedures supports a broader nexus test and that the departmental circular used against the claim had been struck down. On that basis, the appellants established a strong prima facie case against the duty and penalty demands, and waiver of pre-deposit with stay of recovery was granted.

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Issues: Whether the appellants had made out a prima facie case for waiver of pre-deposit and stay of recovery in respect of the duty and penalties demanded under the customs exemption notification in the context of the Target Plus Scheme and the requirement of a broad nexus between the imported item and the export product.

Analysis: The order considered the remand from the High Court and the guidance of the Supreme Court decision in Sayed Ali, but also examined the merits of the exemption claim. It noted that the appellants relied on the High Court ruling in Essel Mining, which construed paragraph 3.2.5 of the Handbook of Procedures to require only a broad nexus with the export product group and held that the benefit of Notification No. 32/2005-Cus. could not be denied on the narrower approach adopted by the department. The Board circular relied upon by the adjudicating authority had also been struck down. On that basis, the Tribunal found that the appellants had shown a strong prima facie case against the demand.

Conclusion: Waiver of pre-deposit and stay of recovery were granted for the duty demands and the penalties.

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