Customs duty on Free Trade Zone surplus goods depends on exemption notification terms, not later domestic clearance date

Customs duty on surplus goods cleared from a Free Trade Zone to the domestic tariff area was governed by the exemption notification's conditions. The notification granted duty relief for goods imported for export production, but required payment of an amount equal to the duty leviable on goods not proved to have been used for that purpose. The charge on the surplus soda ash was therefore fixed by the duty that would have applied under the notification, rather than by the rate prevailing on the date of domestic clearance. The importer's contention was rejected, and the Revenue's position was upheld.

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Issues: Whether customs duty on surplus goods cleared from a Free Trade Zone to the domestic tariff area was payable with reference to the date of original import or the date of clearance on payment of duty.

Analysis: The exemption notification granted relief from customs duty when goods were imported into the Kandla Free Trade Zone for use in the production of export goods, but expressly required the importer to pay on demand an amount equal to the duty leviable on goods not proved to have been used in connection with such production. The liability for the surplus soda ash was therefore governed by the terms of the notification itself, and the duty payable on clearance into the domestic tariff area had to reflect the duty that would have been leviable had the goods not been cleared into the Free Trade Zone under that exemption.

Conclusion: The relevant duty was the duty leviable on the surplus goods under the exemption notification, not the duty rate prevailing on the date of subsequent domestic clearance; the contention of the importer failed and the decision was in favour of the Revenue.

Final Conclusion: The customs liability was fixed by the conditions of the exemption notification, and the surplus goods cleared out of the Free Trade Zone remained chargeable to the duty amount that would originally have been leviable.

Ratio Decidendi: Where an exemption notification grants duty relief subject to a condition that goods not used for the specified export-oriented purpose shall, on demand, bear an amount equal to the duty leviable, the chargeable duty is determined by the notification's terms and not by the date of later domestic clearance.

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