Export notification compliance on duty-free packing material: discard of bags at loading did not revive duty liability.

Duty foregone on duty-free PP bags procured under Notification No. 43/2001-CE(NT) was not recoverable where the bags were used to pack export goods, the goods were cleared under proper A.R.E. forms, and the export goods reached the port in the same packing. The notification required export of the goods processed with the bags, not export of the bags themselves. Because packing was part of the processing and the export goods were exported with Customs-endorsed evidence, the notification condition was satisfied. Removal of the bags at loading and their discard as scrap did not create a duty liability on the bags, and the demand was unsustainable.

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Issues: Whether duty foregone on PP bags procured duty free under Notification No. 43/2001-CE(NT) became recoverable when the bags were used for packing export goods and were discarded at the port, though the export goods themselves were exported.

Analysis: The bags were procured under the notification for packing export goods and the goods packed in them were cleared under proper A.R.E. forms and reached the port in the same packing. The notification required export of the goods for whose processing the bags were used, and did not stipulate that the duty-free bags themselves had to be exported. Since packing was part of the processing of the export goods, and the export goods were in fact exported with Customs-endorsed evidence, the condition of the notification stood satisfied. The fact that the bags were removed at the time of loading and discarded as scrap did not create a recoverable duty liability on the bags.

Conclusion: The demand was not sustainable and the appeal was allowed in favour of the assessee.

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