End-use exemption applies on intended use where imported goods are destroyed by fire and no diversion is proved.

An end-use based exemption for imported waste paper was held to be satisfied by intended use, not actual use, where the goods were covered by the required undertaking but were destroyed in a fire before deployment. Duty could not be demanded merely because actual use became impossible, particularly when no diversion of the goods was proved and the department failed to establish any double benefit from insurance receipts. The reasoning also noted that a remission framework for goods lost or destroyed by unavoidable accident would be undermined if duty were still insisted upon in such circumstances. The duty demand was therefore unsustainable, and the assessee was entitled to consequential relief.

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Issues: (i) whether the expression "for use in manufacture" in the exemption notification requires actual use or only intended use; (ii) whether duty could be demanded when the imported goods were destroyed in a fire and no diversion or double benefit was proved.

Issue (i): whether the expression "for use in manufacture" in the exemption notification requires actual use or only intended use.

Analysis: The notification granted concessional duty to imported waste paper for use in, or supply to, a unit manufacturing paper or paperboard, subject to an undertaking that the goods would be used for the specified purpose. The governing expression had already been construed in earlier decisions to mean intended use, not actual use. A condition requiring end-use does not cease to be satisfied merely because the goods could not be used owing to destruction by fire, particularly when the importer had undertaken the stipulated obligation and informed the department of the loss.

Conclusion: The expression "for use in manufacture" denotes intended use, not actual use, and the assessee was not disqualified on that ground.

Issue (ii): whether duty could be demanded when the imported goods were destroyed in a fire and no diversion or double benefit was proved.

Analysis: The record showed that the loss was caused by fire and that the department had not established diversion of the goods to any other use. The reasoning also noted that provisions for remission where goods are lost or destroyed by unavoidable accident would be rendered redundant if duty were still demanded merely because the goods could not be put to the intended use. The allegation of double benefit through insurance was held unproved in the absence of documentary evidence showing receipt of tax amounts.

Conclusion: Duty demand was not sustainable and the allegation of double benefit failed.

Final Conclusion: The impugned duty demand was set aside and the assessee obtained consequential relief.

Ratio Decidendi: Where imported goods covered by an end-use based exemption are destroyed by fire without diversion, the condition of use is satisfied by intended use and duty cannot be denied or demanded merely because actual use became impossible.

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