Bona fide exporter exemption denied where imported labels supported domestic sales and no foreign exchange earnings were shown.

Exemption under Notification No. 20/99-Cus. was confined to imports by a bona fide exporter, and the exemption was understood as supporting export activity and foreign exchange earnings. On the record, the importer failed to establish that the labels were used to generate export earnings, while statements of key personnel showed that most jeans manufactured with the imported labels were sold in the domestic market. Although the notification did not expressly impose an end-use condition, conduct inconsistent with export promotion was treated as incompatible with bona fide importation for the exemption. The importer was therefore denied the exemption.

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Issues: Whether the appellant was entitled to exemption under Notification No. 20/99-Cus. dated 28.02.1999 as a bona fide exporter notwithstanding the finding that the imported labels were largely used for domestic sales and no foreign exchange earnings were established.

Analysis: The notification granted exemption to goods imported by a bona fide exporter. The appellant's entitlement depended on satisfying the essential character of bona fide export activity underlying the exemption. On the record, the appellant failed to show that the imported labels were used to generate export earnings or foreign exchange for the country. The statements of key personnel indicated that most of the jeans manufactured with the imported labels were sold in the domestic market. Even though the notification did not expressly prescribe an end-use condition, the exemption was held to operate in public interest to encourage exports and earn foreign exchange. Conduct defeating that object was treated as inconsistent with bona fide importation for the purpose of the notification.

Conclusion: The appellant was not entitled to the exemption, as it was not shown to be a bona fide exporter within the meaning of the notification.

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