Duty-free import benefit under export schemes is not defeated by lack of physical incorporation in the exported product.

The notification scheme under Notifications No. 93/2004-Cus. and 94/2004-Cus. distinguishes imports made before and after fulfilment of export obligation. Where the export obligation has already been satisfied and the EODC issued, the relevant shipping bill particulars are to be endorsed on the licence. The imported inputs are not required to be physically incorporated in the exported product as an inflexible condition; Board Circular No. 4/93 clarifies that "required" does not mean actual physical use, but goods of a kind commercially used in the export product. On that basis, the benefit of the notifications is available once the scheme is otherwise satisfied.

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Issues: Whether the benefit of Notifications No. 93/2004-Cus. and 94/2004-Cus. was available when the exporter had already discharged the export obligation and subsequently imported raw materials duty-free, and whether such imported raw materials had to be used compulsorily in the exported resultant product.

Analysis: The Notification scheme distinguished between imports made after fulfilment of export obligation and imports made before such fulfilment. Where export obligation had already been satisfied, the relevant shipping bill particulars were to be endorsed on the licence. The requirement that the imported inputs be used in the export product was not treated as an inflexible condition barring other modes of utilisation, especially when the export obligation had been completed and the EODC had been issued. The Board's Circular No. 4/93 clarified that the word "required" did not mean physical incorporation of the imported goods in the export product, and the imported inputs could be of a kind commercially used in the export product. The cited precedent was applied to hold that use of imported materials in the exported goods was not a condition precedent where the scheme otherwise stood satisfied.

Conclusion: The respondents were entitled to the benefit of the notifications, and the Revenue's objection failed.

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