Duty-free import conditions upheld where export use, credit reversal, and completed export obligation showed no material breach.

Import of duty-free materials under Notifications No. 203/92-Cus. and 204/92-Cus. was held not to breach the notification conditions where the inputs were used in export manufacture, Modvat credit at the input stage was reversed with interest under the amnesty scheme, and the export obligation under the VABAL licences was treated as completed. Transactions under the QBAL licences were treated as post-export and, at most, a technical lapse. As the Revenue failed to show any material non-reversal of credit or substantive violation of the conditions, the demand of customs duty and consequential confiscation did not survive.

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Issues: Whether the respondents violated the conditions of Notification No. 203/92-Cus. and Notification No. 204/92-Cus. so as to justify demand of customs duty and confiscation of the imported duty-free materials.

Analysis: The imported inputs were found to have been used in the manufacture of export goods, and the Modvat credit taken at the input stage was reversed pursuant to the amnesty scheme with interest. The export obligation under the VABAL licences was treated as completed, while the transactions under the QBAL licences were viewed as occurring after export and, at most, involving a technical lapse. The Revenue did not establish any non-reversal of credit or any material breach of the notification conditions.

Conclusion: No violation of the notification conditions was established, and the demand of duty and consequential confiscation did not survive.

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