Strict compliance under concessional duty schemes denied where export and use conditions were breached in substance.

Strict compliance is required under a concessional duty scheme for permission, utilisation and export of duty-free goods, and a breach going to the substance of those conditions cannot be treated as a mere procedural lapse. Here, goods were exported before the required permission and annexure were issued, and the procurement and use of excisable inputs were not shown to conform to the prescribed scheme. Authorities on condonation of procedural irregularities were distinguished because they did not cover substantive breach of mandatory conditions. The notification benefit was therefore not available.

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Issues: Whether the appellant's procurement and use of excisable goods without payment of duty, followed by export prior to grant of permission and alleged diversion of inputs, amounted only to a procedural lapse so as to retain the benefit of the notification and rules, or constituted substantive non-compliance disentitling the appellant to exemption.

Analysis: The appellant had exported goods before the requisite permission and annexure 45 were issued and had also procured duty-free material for purposes not shown to be in strict conformity with the prescribed conditions. The claimed export was not treated as an instance of mere irregularity, because the goods procured under the concessional scheme were not used in the intended manner and the factual pattern showed non-observance of the mandatory conditions governing procurement and utilisation. The cited authorities on condonation of procedural lapses were distinguished on the ground that they did not cover a case where the prescribed scheme had been breached in substance. In such a situation, the benefit of the notification could not be retained.

Conclusion: The non-compliance was held to be substantive and not a curable procedural defect, and the benefit of the notification was denied.

Ratio Decidendi: Where goods are procured under a concessional duty scheme, the prescribed conditions for permission, utilisation, and export must be strictly complied with, and a breach going to the substance of the scheme cannot be excused as a mere procedural irregularity.

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