Advance release order requirement cannot defeat exemption where the invalidation letter serves as its functional equivalent.

Exemption under Notification No. 28/2001-C.E. could not be refused merely because a separate advance release order was not produced when the DGFT had issued an invalidation letter and clarified that it was the functional equivalent of an ARO. The Tribunal treated the procedural requirement as subordinate to the substantive condition that supplies be made to the advance licence holder whose licence had been invalidated. Where the licensing authority itself declined to issue a separate ARO and recognised the invalidation letter as sufficient, insistence on a separate document would defeat the policy intent behind the Foreign Trade Policy and the exemption notification. The benefit of exemption was therefore available on these facts.

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Issues: Whether exemption under Notification No. 28/2001-C.E. could be denied solely for non-production of an advance release order when the DGFT had issued an invalidation letter and clarified that no separate ARO was required.

Analysis: The dispute turned on the effect of the requirement of production of an advance release order under the exemption notification. The Tribunal noted that the DGFT had already clarified that the invalidation letter issued in favour of the assessee was itself the equivalent of an advance release order and that a separate ARO was not to be issued. The supplies had in fact been made to the advance licence holder whose licence stood invalidated, and the procedural insistence on a separate ARO was treated as defeating the legislative intent reflected in the Foreign Trade Policy and the notification. The Tribunal also accepted that the condition in the notification was meant to ensure supply to the licence holder and not to impose an impossible procedural requirement where the licensing authority had declined to issue a separate ARO.

Conclusion: Denial of the exemption on the ground of non-production of a separate advance release order was not justified, and the benefit was available to the assessee.

Final Conclusion: The impugned order was set aside and the appeal was allowed with consequential relief.

Ratio Decidendi: Where the licensing authority treats an invalidation letter as the functional equivalent of an advance release order, exemption cannot be denied merely for absence of a separate ARO if the substantive condition of supply to the advance licence holder is otherwise satisfied.

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