Advance licence duty exemption cannot be denied when import policy treats silk inputs as interchangeable.

Duty exemption under an advance licence cannot be denied where the governing import policy and public notice for the relevant period treat mulberry raw silk and dupion yarn as interchangeable or merged descriptions of raw material. The customs authority's insistence on a stricter identity test was not supported by that regime and was treated as an artificial distinction. On the stated facts, the export obligation had been fulfilled and the exported goods were certified as natural silk fabrics, so the importer remained entitled to full exemption on the disputed inputs.

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Issues: Whether duty exemption under an advance licence could be denied for imported inputs on the ground that mulberry raw silk and dupion yarn were not identical in specifications and technical characteristics, despite the policy and public notice treating them as interchangeable or merged categories.

Analysis: The relevant import policy and public notice under Appendix 13C of the Import/Export Policy 1988-91 treated mulberry raw silk of any grade and dupion yarn as a merged description of raw material for the relevant period. The later notification relied upon by the customs authority was applied as if it introduced a stricter requirement of absolute sameness, whereas the controlling policy position for the disputed period allowed interchangeability. The distinction drawn between the two varieties of silk was therefore held to be artificial for the purpose of denying the benefit of the licence, especially when the export obligation had already been fulfilled and the exported goods were certified as natural silk fabrics.

Conclusion: Duty exemption could not be denied on the basis of the alleged mismatch between the imported input and the exported product, and full exemption was payable on the disputed inputs.

Final Conclusion: The appeal succeeded and the customs order restricting exemption was set aside, with the importer held entitled to full duty exemption on the disputed consignment.

Ratio Decidendi: Where the governing import policy and public notice treat two materials as interchangeable or merged for the relevant period, customs authorities cannot deny duty exemption by insisting on a narrower identity test not supported by that regime.

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