Export input exemption survived where fibre composition was certified and contrary visual reports lacked conclusive testing.

Imported inputs were not denied exemption merely because the exported goods were later questioned as not being made from 100% acrylic fibre. The textile authority had certified the export goods as 100% acrylic fibre, while the contrary material rested only on visual inspection and lacked conclusive chemical testing. The licensing record also showed that the export obligation under the licence was treated as fulfilled. On these facts, the condition for demanding duty on inputs said to have been unused in the export product was not met, and the duty demand and penalty were held unsustainable.

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Issues: Whether the imported inputs lost the benefit of exemption on the ground that the exported goods were not manufactured from 100% acrylic fibre, and whether duty demand and penalty could be sustained.

Analysis: The textile authority had certified the export goods as 100% acrylic fibre, while the contrary reports were based only on visual examination and were not supported by conclusive chemical testing. The record also showed that the export obligation under the licence was treated as fulfilled by the licensing authority. In these circumstances, the condition for demanding duty on inputs not used in the export product was not attracted.

Conclusion: The duty demand and the penalty were not sustainable, and the appeal was allowed.

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