Proof of breach under export incentive conditions is essential; unsupported allegations cannot sustain duty, interest, or penalty.

A demand under Notification No. 203/92-Cus. was found unsustainable because the alleged breach of condition V(A) was not supported by evidence. The show cause notice merely alleged that Modvat credit had been taken on the exported goods, but no factual verification or documentary material established availment of input-stage credit, and the non-availment declaration on the export documents was not shown to be false. In the absence of proof of suppression or misstatement, the extended period could not be invoked. With the duty demand failing on merits, the consequential interest and penalty also could not survive.

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Issues: Whether the demand under Notification No. 203/92-Cus. was sustainable when the show cause notice alleged violation of condition V(A) without supporting material to show availment of input-stage credit, and whether the consequential demand, interest and penalty could survive.

Analysis: The show cause notice proceeded on an allegation that Modvat credit had been availed in respect of the exported goods, but no factual inquiry or documentary material was brought on record to substantiate that allegation. The declaration of non-availment on the export documents was not shown to be false, and the department did not verify the factual position at the supporting manufacturer's end. In these circumstances, the alleged contravention of condition V(A) of Notification No. 203/92-Cus. was not established. The reasoning also supported the assessee's plea that the extended period could not be invoked in the absence of material showing suppression or misstatement. Since the foundation of the duty demand failed, the consequential interest and penalty could not be sustained.

Conclusion: The demand was unsustainable for want of evidence of breach of the notification condition, and the assessee succeeded on the merits.

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