Exemption notification proviso governs DTA clearances, requiring duty on inputs used in manufacture of exempted goods.

A proviso in an exemption notification must be read as qualifying the main exemption and cannot be treated as independent unless the text clearly so provides. In the context of a 100% Export Oriented Unit clearing finished goods into the Domestic Tariff Area, the notification required payment of customs duty attributable to the duty-free imported or indigenous inputs used in manufacture. The Tribunal rejected the argument that the main clause alone governed the liability and held that the proviso controlled the scope of the exemption. On that basis, duty on the relevant inputs was payable at the stage of Domestic Tariff Area clearance.

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Issues: Whether the appellant, a 100% Export Oriented Unit, was liable to pay duty on inputs used in the manufacture of goods cleared in the Domestic Tariff Area under the exemption notifications, and whether the proviso to Notification No. 52/2003-Cus could be ignored by treating the main clause as independently applicable.

Analysis: The Tribunal followed its earlier decision in the appellant's own case and held that the proviso to the notification had to be read with the main clause. Where finished goods manufactured with duty-free imported or indigenous inputs were cleared in the Domestic Tariff Area without payment of duty, the proviso required payment of customs duty equal to the duty attributable to the inputs that would otherwise have been payable. The argument that the main paragraph alone governed the case and that the proviso could not control its scope was rejected on settled principles that a proviso qualifies the enacting part and cannot be treated as wholly independent unless the statutory text so indicates. The Tribunal therefore found no merit in the contention that the demand could not be sustained.

Conclusion: The appellant was liable to discharge the duty demanded on the inputs used in the manufacture of the exempted goods cleared to the Domestic Tariff Area, and the impugned orders were upheld.

Final Conclusion: The appeals failed because the exemption notification was held to require duty payment on the relevant inputs at the stage of Domestic Tariff Area clearance, and the demand survived.

Ratio Decidendi: A proviso attached to an exemption notification must be read as qualifying the main exemption, and where the proviso expressly provides for duty on inputs used in goods cleared to the Domestic Tariff Area, that liability cannot be avoided by relying on the main clause alone.

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