Advance licence imports retain exemption where lower input consumption does not breach notification conditions.

Customs duty cannot be demanded on duty-free imported inputs under a valid advance licence merely because actual consumption was lower than the Standard Input Output Norms, where no specific condition of the exemption notification was breached. The imported goods were covered by the notified scheme, and both the earlier High Court ruling in the assessee's own case and a later appellate order had accepted that lower consumption by itself does not justify denial of exemption. On the same factual and legal position, the duty demand was held unsustainable.

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Issues: Whether customs duty could be demanded on duty-free imported inputs merely because the exporter consumed lesser quantity than the Standard Input Output Norms under the advance licence and exemption notification.

Analysis: The imported goods were covered by a valid advance licence issued under the notified norms. The record showed no violation of the conditions of the exemption notification. The earlier High Court decision in the assessee's own case and the order of the Commissioner (Appeals) for a subsequent period had both accepted that, in the absence of any specific breach of the notification conditions, the customs authorities could not deny the benefit or raise duty demand only because the actual consumption of inputs was lower than the prescribed norm. The same issue arose here and the factual and legal position remained identical.

Conclusion: The duty demand was not sustainable and the appeal succeeded.

Ratio Decidendi: Where import is made under a valid advance licence and the exemption notification is complied with, customs authorities cannot demand duty merely because the actual input consumption is below the notified norm, in the absence of a specific violation of the notification conditions.

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