Limitation on demand after breach of re-export condition bars duty recovery where exempt goods were ultimately re-exported.

Imported goods cleared at a concessional rate under an exemption notification were required to be re-exported within six months. Although that condition was not met for certain bills of entry, the record showed that the goods were ultimately re-exported. The demand seeking to deny the exemption and recover duty had therefore to be raised within the prescribed one-year limitation period. As the show cause notice was issued after more than three years, the demand was barred by limitation and the order dropping the proceedings was upheld.

---

---

Issues: Whether the demand of duty by denying the benefit of the exemption notification was barred by limitation in view of the delayed show cause notice.

Analysis: The goods were imported at a concessional rate of duty under Notification No. 32/1997-C dated 01.04.1997 subject to re-export within six months. Although re-export within six months was not complied with in respect of certain bills of entry, the record showed that the goods were ultimately re-exported. In these circumstances, the notice seeking to deny the exemption and recover duty was required to be issued within the prescribed period of one year. As the notice was issued after more than three years, the demand was held to be hit by limitation.

Conclusion: The demand was time-barred and the order dropping the proceedings was upheld.

Ratio Decidendi: Where the imported goods are ultimately re-exported, a demand to deny exemption for breach of the re-export condition must be initiated within the prescribed limitation period, and a notice issued beyond that period is barred by limitation.

---