Customs exemption for imported goods depends on matching substantive excise conditions, including duty-paid inputs and no CENVAT credit.

Imported goods may claim a customs exemption linked to excise duty only if the corresponding domestic manufacture would satisfy the same substantive conditions. A notification that is merely procedural can extend to imports, but where exemption depends on duty-paid inputs or non-availment of CENVAT credit, those requirements are substantive and cannot be met simply by showing that no credit was taken. The Court also noted that silk fabric manufacture could involve inputs beyond raw silk or silk waste, and no material was produced to show that all relevant inputs were duty-free. On that basis, the imported silk fabrics were held not entitled to the exemption.

---

---

Issues: Whether imported silk fabrics were entitled to exemption from countervailing duty under Notification No. 30/2004-CE dated 09.07.2004, and whether the notification could be applied to imported goods when its conditions were framed in relation to duty-paid inputs and non-availment of CENVAT credit.

Analysis: The liability under Section 3(1) of the Customs Tariff Act, 1975 is intended to place imported goods on the same footing as domestically manufactured goods. A notification granting exemption from excise duty can extend to imports only if the corresponding domestic manufacture would also enjoy that exemption. Where the notification is merely procedural, an importer may still claim the benefit. But where the notification conditions the exemption on inputs having suffered excise duty or on no CENVAT credit having been taken, those requirements are substantive. The judgment treated the non-availment of CENVAT credit condition as carrying within it the premise that the inputs had actually suffered duty, and held that an importer cannot satisfy such a condition merely because no credit was taken. On the facts, the Court further held that silk fabric manufacture could involve inputs beyond raw silk or silk waste, and no material was shown to establish that all such inputs were duty-free so as to make the proviso wholly inapplicable.

Conclusion: The imported silk fabrics were not entitled to the exemption, and the questions of law were answered against the assessee.

Final Conclusion: The Revenue succeeded, and the exemption claim on imported silk fabrics failed.

Ratio Decidendi: An importer can claim a customs exemption linked to excise duty only when the corresponding domestic manufacture would satisfy the same substantive conditions, and a condition barring CENVAT credit presupposes duty-paid inputs unless the notification itself is absolute.

---