Import entitlement scheme: duty-free raw material use, not appendix labels, governs customs duty liability and remand.

The Tribunal misread the import entitlement scheme by treating a passbook licence as requiring export obligation to be fulfilled in both quantity and value solely from the policy appendices; the governing question was whether the duty-free brass scrap was actually used in manufacture of the exported goods. Appendix 14-C was concerned only with certification for sensitive items, not with altering the underlying import entitlement, and the earlier authorities had not fully examined the assessee's evidence on actual utilisation and non-domestic disposal. The demand for customs duty could not be sustained without that factual inquiry, and the matter was remitted for reconsideration.

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Issues: Whether the Tribunal erred in treating the passbook licence as requiring fulfilment of export obligation both in quantity and value on the basis of the policy appendices, and whether the demand for customs duty could be sustained without examining whether the imported duty-free brass scrap was in fact utilized in manufacture of the exported goods.

Analysis: The dispute turned on the proper reading of the import entitlement scheme and the exemption notification. The Tribunal's distinction between an Appendix 14-A and Appendix 14-C licence was found to be misconceived because Appendix 14-C only dealt with the requirement of a certificate for sensitive items, while the import entitlement itself was governed by the relevant entitlement appendix. The real question was not the label of the appendix but whether the duty-free raw material had been used for the intended export production. The earlier authorities had not examined the assessee's specific case and supporting material on actual utilization and non-domestic disposal in a complete manner.

Conclusion: The Tribunal's approach was held to be erroneous, and the matter was remitted for reconsideration of the factual question whether the entire imported raw material was satisfactorily utilized in the manufacture of the exported products.

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