Conditional customs exemption survives re-export before notice, defeating duty demand where irregular importation is not proved.

Imported goods covered by a conditional exemption for job work and re-export were returned in the same condition before any show-cause notice was issued, after the underlying contract was cancelled. On those facts, the duty demand and interest were held unsustainable because the goods were no longer in India when notice was issued and the department had not specifically established irregular importation. The impugned adjudication confirming the demand was set aside in favour of the assessee.

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Issues: Whether the duty demand and interest could be sustained when the imported goods were re-exported before issuance of the show-cause notice and the conditions of Notification No. 32/97-Cus dated 01.04.1997 stood complied with at the time of import.

Analysis: The imported goods were brought in for job work and intended re-export under the exemption notification. The subsequent cancellation of the contract led to re-export of the goods in the same condition before any show-cause notice was issued. At the time the notice was issued, the goods were no longer available in India. On these facts, the demand was treated as one confined to alleged irregular importation, which had not been specifically made out by the department.

Conclusion: The duty demand and interest could not be sustained, and the impugned order was set aside in favour of the assessee.

Final Conclusion: The appeal succeeded and the adjudication confirming the demand was overturned.

Ratio Decidendi: Where imported goods covered by a conditional exemption are re-exported before issuance of the show-cause notice and the allegation of irregular importation is not specifically established, the resulting duty demand cannot be sustained.

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