Conditional customs exemption fails when re-warehousing proof is absent, and the resulting duty demand is sustained.

Conditional customs exemption under Notification No. 53/97-Cus. was denied where the importer failed to produce re-warehousing certificates and the record showed diversion of the duty-free raw materials; the customs duty demand with interest was therefore sustained. On the central excise side, the finished goods had been cleared without payment of duty, but the order recorded that the duty amount had already been paid and no basis was shown to disturb that finding; the excise demand was consequently left undisturbed. The order confirming both duty demands was upheld and the appeal failed in entirety.

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Issues: (i) Whether the appellant was liable to pay customs duty on imported raw materials cleared under Notification No. 53/97-Cus. when re-warehousing certificates were not produced and the goods were found to have been diverted; (ii) Whether the central excise duty demand on the finished goods required interference.

Issue (i): Whether the appellant was liable to pay customs duty on imported raw materials cleared under Notification No. 53/97-Cus. when re-warehousing certificates were not produced and the goods were found to have been diverted.

Analysis: The exemption was available only on fulfilment of the prescribed conditions. The record showed that the raw materials imported without duty were used in manufacture, but the resulting goods were not re-warehoused as required. In the absence of evidence to rebut the findings in the impugned order, the failure to satisfy the notification conditions attracted liability to customs duty on the raw materials.

Conclusion: The customs duty demand with interest was correctly sustained against the appellant, in favour of Revenue.

Issue (ii): Whether the central excise duty demand on the finished goods required interference.

Analysis: The appellant had cleared the finished goods without payment of central excise duty, and the order recorded that the duty amount had already been paid and was not disputed. No basis was shown to disturb that finding.

Conclusion: The central excise duty aspect did not warrant any interference and remained against the appellant.

Final Conclusion: The order confirming the duty demands was upheld and the appeal failed in entirety.

Ratio Decidendi: Where exemption from duty is conditional, non-fulfilment of the notification requirements, including failure to establish re-warehousing, justifies confirmation of duty demand.

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