Customs exemption for manufacturing use cannot be denied for transit shortfall absent any allegation of diversion.

Concessional customs exemption for vegetable oil imported for manufacture of vanaspati could not be denied merely because part of the consignment was short delivered at port and short received in the factory. The operative test was whether the goods were intended for the specified manufacturing use and whether there was any diversion to another purpose; in the absence of any allegation of diversion, transit-related shortfall did not defeat the notification benefit. The demand against the importer was therefore not sustainable.

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Issues: Whether the concessional customs notification could be denied for the quantity of imported vegetable oil that was short delivered or short received, where there was no allegation of diversion to any other use.

Analysis: The notification granted concessional duty for vegetable oil imported for manufacture of vanaspati. The decisive consideration was whether the imported goods were intended for the specified manufacturing use and whether there was any diversion to other purposes. In the absence of any allegation of diversion, and following the principle that exemption cannot be denied merely because goods were lost, leaked, or otherwise not available due to transit-related shortfall, the short delivery at port and short receipt in the factory did not disentitle the importer from the notification benefit.

Conclusion: The concessional benefit could not be denied for the disputed quantity, and the demand was not sustainable against the assessee.

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