DFIA disclosure conditions do not make freely exportable goods prohibited; confiscation and penalty fail without a statutory export restriction.

Conditions attached to the DFIA scheme and related handbook provisions governed entitlement to duty-free import benefits and the description of imported inputs, but they did not by themselves render otherwise freely exportable goods prohibited for export. The exported pan masala and gutkha were not shown to be restricted under the Foreign Trade Policy or any other law, and there was no evidence that they were resultant products of the disputed inputs. Non-declaration in the shipping bills could at most affect DFIA-related benefits or licensing action; it did not justify confiscation under Section 113(d) of the Customs Act or the consequent penalty. Prior DGFT action on the same alleged suppression also indicated that customs proceedings could not punish the same default again.

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Issues: Whether freely exportable goods become prohibited for export, and liable to confiscation and penalty, merely because the shipping bills did not declare the technical characteristics of inputs required under the Duty Free Import Authorisation scheme and related handbook conditions.

Analysis: The governing notifications and handbook provisions operated in the context of duty-free import of inputs under the DFIA scheme. Their conditions were relevant to the entitlement to import benefits and to the description of imported materials, not to the exportability of the finished goods. The exported goods were not shown to be restricted or prohibited under the Foreign Trade Policy or any other law, and there was no evidence that the exported pan masala and gutkha were themselves resultant products of the disputed imported inputs. The non-disclosure on shipping bills could at most affect the DFIA-related import benefit or invite action by the licensing authority, but it did not convert the exports into prohibited goods. In the absence of a valid prohibition, confiscation under Section 113(d) of the Customs Act, 1962 could not be sustained, and the consequential penalty also failed. The prior action by the DGFT authorities on the same alleged suppression further supported the conclusion that the customs proceedings could not be used to punish the same alleged default again.

Conclusion: The non-declaration did not make the exported goods prohibited, and confiscation and penalty were not sustainable.

Ratio Decidendi: Conditions attached to duty-free import incentives cannot, by themselves, render otherwise freely exportable goods prohibited for export unless the export goods are shown to be subject to a statutory prohibition or to have been exported contrary to an operative legal restriction.

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