Exemption conditions must arise from the notification itself; SEZ clearance can satisfy the export requirement for imported goods.

An exemption for imported goods used in petroleum operations was held to depend on the conditions stated in the notification itself, not on an additional re-export stipulation introduced through the DGH certificate. The notification required a valid DGH certificate but did not impose any time limit for re-export, so the certificate-based restriction could not be treated as mandatory. Clearance of the goods to an SEZ unit was treated as satisfying the export-related condition, with section 2(m) of the SEZ Act applied and section 69(1) of the Customs Act regarded as inapplicable on these facts. The exemption benefit was therefore available and the demand, interest, and penalty could not stand.

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Issues: (i) Whether the exemption notification for imported goods required the importer to re-export the goods within a stipulated time; (ii) whether clearance of the goods to an SEZ unit satisfied the export-related condition imposed in the DGH certificate.

Issue (i): Whether the exemption notification for imported goods required the importer to re-export the goods within a stipulated time.

Analysis: The notification applicable to the goods required the sub-contractor to produce a DGH certificate confirming that the goods were required for petroleum operations and were imported under the relevant licence or mining lease. The notification itself did not prescribe any time limit for re-export. A re-export stipulation was found only in the certificate issued by the DGH, which had been influenced by the Foreign Trade Policy. The binding condition for exemption had to be traced to the notification, not to an additional restriction introduced in the certificate.

Conclusion: The notification did not require re-export within a stipulated time, and the additional re-export condition could not be treated as a mandatory condition of exemption.

Issue (ii): Whether clearance of the goods to an SEZ unit satisfied the export-related condition imposed in the DGH certificate.

Analysis: The earlier Tribunal view relied upon held that use of the goods during the permitted period followed by clearance to an SEZ unit amounted to export by virtue of section 2(m) of the SEZ Act, 2005. That reasoning was applied here as well. The reliance on section 69(1) of the Customs Act, 1962 was held to be misplaced because that provision concerns warehoused goods for export and had no application to the facts.

Conclusion: Clearance to the SEZ unit satisfied the export requirement and there was no breach of the exemption conditions.

Final Conclusion: The demand, interest, and penalty could not be sustained, and the assessee was entitled to the exemption benefit.

Ratio Decidendi: A condition for exemption must be found in the exemption notification itself, and clearance of imported goods to an SEZ unit constitutes export for purposes of satisfying the relevant exemption requirement.

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