Customs duty exemption turns on the date goods enter territorial waters, not later withdrawal of the notification.

Customs duty liability was held to depend on the date goods entered the territorial waters of India. Because a total exemption notification was in force on that date, duty could not be imposed merely because the notification was later withdrawn before the bill of entry for home consumption was filed. The earlier Full Bench ruling on the same point was treated as conclusive, and the demand for customs duty was held unsustainable, with exemption available to the importer.

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Issues: Whether customs duty was leviable on imported goods when the goods had entered the territorial waters of India during the currency of an exemption notification, but the bill of entry for home consumption was filed after the exemption had been withdrawn.

Analysis: The governing principle applied was that liability to customs duty is determined with reference to the date when the goods enter the territorial waters of India. Where a total exemption is in force on that date, duty cannot be levied merely because the exemption is later rescinded before filing of the bill of entry for home consumption. The earlier Full Bench decision on the same point was treated as conclusive.

Conclusion: The demand of customs duty was unsustainable and the petitioners were entitled to exemption; the issue was decided in favour of the assessee.

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