Pending exemption claim does not stop recovery demand; conditional compliance required while exemption is considered on merits.

A pending exemption application did not, by itself, suspend liability to comply with an existing demand for cost recovery charges. The Court declined to decide entitlement to exemption on merits, but held that exemption notifications must be applied strictly in accordance with the prescribed conditions, including those reflected in CBEC Circular No. 16/2013-Cus. dated 10.04.2013. To balance recovery with preservation of the exemption claim, the Court required payment of quantified arrears, part-payment for the subsequent period, and security for the balance, while directing the competent authority to consider the exemption application on merits. No substantive exemption relief was granted.

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Issues: Whether the petitioner was liable to pay the demanded cost recovery charges pending decision on the exemption application, and whether conditional directions could be issued to preserve the petitioner's claim for exemption.

Analysis: The petitioner's exemption request was still pending before the competent authority, and the Court declined to decide the merits of entitlement to exemption. At the same time, the existing demand for the earlier period could not be ignored, particularly where the petitioner had stopped remitting charges without a formal exemption. The Court also noted that exemption claims are governed by the applicable notification and the conditions prescribed by the CBEC in Circular No. 16/2013-Cus. dated 10.04.2013. In the circumstances, the Court found it appropriate to balance recovery and consideration of the exemption claim by imposing compliance conditions, including payment of the quantified arrears, part-payment for the subsequent period, and furnishing of security for the balance.

Conclusion: The petitioner was directed to pay the quantified arrears and comply with the stipulated conditions, while the competent authority was directed to consider the exemption application on merits; the Court did not grant substantive exemption relief.

Final Conclusion: The writ petition was disposed of by granting only conditional relief, preserving the petitioner's exemption claim but requiring compliance with payment and security conditions in the meantime.

Ratio Decidendi: An exemption claim pending consideration does not, by itself, extinguish the liability to comply with an existing demand, and exemption notifications must be strictly applied in accordance with the prescribed conditions before relief can be granted.

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