Advance authorisation redemption bars customs duty demand when export obligation is fulfilled and notification conditions are not violated.

Where an advance authorisation has been redeemed by the licensing authority after fulfilment of the export obligation, customs authorities cannot sustain duty demand, redemption fine or penalty on a contrary view that the imported goods were not used in export manufacture. The text explains that loss of part of the imported cocoa paste in transit was intimated, the shortfall was made good from local procurement, and no rebate or drawback was claimed on those local goods. It further notes that the exemption condition against transfer or sale was not breached because the goods were neither transferred nor sold, but lost in transit. The operative principle is that exemption cannot be denied absent a proved violation of the notification itself.

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Issues: Whether customs duty, redemption fine and penalty could be sustained when the advance authorisation had been redeemed by the licensing authority and the export obligation had been fulfilled, and whether the import conditions under Notification No. 93/2004-Cus dated 10.09.2004 were violated.

Analysis: The imported cocoa paste was covered by advance authorisation and the export obligation was subsequently discharged. The loss of part of the imported quantity in transit was intimated, the shortfall was made good from the local market, and no rebate or drawback was claimed on the locally procured goods. Once the licensing authority accepted fulfilment of the export obligation and redeemed the authorisation, the customs authorities could not reopen the matter on the ground that the imported goods were not used in the export manufacture. The condition in the exemption notification prohibiting transfer or sale of the imported goods was also not breached, because the goods were neither transferred nor sold but were lost in transit.

Conclusion: The demand of duty, redemption fine and penalty could not be sustained, and the assessee succeeded on this issue.

Ratio Decidendi: When an advance authorisation has been redeemed by the licensing authority upon fulfilment of export obligation, customs authorities cannot deny the exemption or sustain duty demand on a contrary assessment of the licence conditions unless there is a proved violation of the exemption notification itself.

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