Conditional export exemption fails when export obligation is unmet, making duty and confiscation sustainable despite notification rescission.

Exemption for EOU/EPZ imports remained conditional on use of goods for export production and satisfaction of the Development Commissioner. On failure to fulfil export obligation and obtain debonding approval, the benefit of exemption could not continue, so customs duty and central excise duty became payable despite rescission of the earlier notifications. The Commissioner's jurisdiction over the Noida Export Processing Zone was upheld, and confiscation was sustained because the goods breached exemption conditions. The composite penalty, however, was not maintained because it was not properly apportioned between the two enactments.

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Issues: (i) Whether customs duty and central excise duty were demandable despite rescission of the earlier exemption notifications and in view of the unit's failure to fulfil export obligation and obtain debonding approval; (ii) whether the Commissioner had jurisdiction over the Noida Export Processing Zone and whether the confiscation and composite penalty order were sustainable.

Issue (i): Whether customs duty and central excise duty were demandable despite rescission of the earlier exemption notifications and in view of the unit's failure to fulfil export obligation and obtain debonding approval.

Analysis: The earlier notifications were read with the successor notifications, the Exim Policy and the Development Commissioner's report. The exemption under the later notifications was conditional upon use of the goods for export production and satisfaction of the Development Commissioner. Once the unit had failed to fulfil the prescribed export obligation and the competent authority had recommended debonding, the benefit of exemption could not continue and duty became payable.

Conclusion: Duty demand was valid and sustainable against the assessee.

Issue (ii): Whether the Commissioner had jurisdiction over the Noida Export Processing Zone and whether the confiscation and composite penalty order were sustainable.

Analysis: The materials on record showed that the Commissioner of Customs, Delhi had administrative and jurisdictional control over the Noida Export Processing Zone, and the Board's instructions also supported exercise of authority in such matters. Confiscation was upheld because the goods were found to have breached the exemption conditions. However, the penalty order was not maintained because the composite penalty was not properly apportioned between the two enactments, affecting the assessee's defence.

Conclusion: Jurisdiction and confiscation were upheld, but the penalty was set aside.

Final Conclusion: The demand of duty and confiscation were sustained, while the penalty portion was annulled, resulting in only partial relief to the assessee.

Ratio Decidendi: Where exemption for EOU/EPZ imports is conditional upon fulfilment of export obligation and satisfaction of the competent development authority, failure of those conditions on debonding makes the duty exempted goods liable to duty and confiscation notwithstanding rescission of the earlier notification.

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