End-use bond conditions on exempt imports may be upheld, but only to the extent needed to secure the first sale.

Customs could require an end-use bond as a reasonable safeguard where imported goods qualified for exemption under Notification No. 28/90-Cus. and there was a risk of misuse or diversion. The imported lactose satisfied the prescribed homeopathic standard, so the exemption was maintained; however, the protective bond condition was upheld to secure compliance. At the same time, the bond obligation could not be extended beyond what was necessary, and the importers were not required to account for sales after the first sale from them to another party. The exemption therefore remained in force with a limited restriction on the scope of the bond.

---

---

Issues: Whether the importers, while being granted exemption under Notification No. 28/90-Cus. dated 20-3-1990, could be required to execute an end-use bond and whether such bond could extend beyond the first sale of the imported goods.

Analysis: The imported lactose was found to answer the prescribed homeopathic standard, and the exemption was accepted. The remaining question was whether, to prevent misuse of the concessional entry, Customs could insist on a bond/undertaking as a safeguard. The requirement was held to be reasonable as a precautionary measure, but the appellants' difficulty in controlling subsequent sales was also recognized.

Conclusion: The condition requiring an end-use bond was upheld, but the appellants were relieved from accounting for sales beyond the first sale from them to another party.

Final Conclusion: The exemption was sustained with a limited modification to the scope of the bond obligation in favour of the importers.

Ratio Decidendi: Where an exemption is allowed and there is a reasonable risk of diversion, Customs may impose a protective bond to prevent misuse, but the condition cannot be extended beyond what is necessary to secure the first transaction from the importer.

---