EPZ imports must match licence conditions; non-conforming goods lose exemption and attract confiscation and penalty.

Imports into an Export Processing Zone must conform to the Letter of Approval, project report or other applicable import authorisation. Lycra yarn that was not covered by the approved description was treated as unauthorised, and such non-conforming import was regarded as prohibited for customs purposes under the Imports Control regime. Because the goods were not covered by the requisite licence and the prescribed export-zone use conditions were not met, exemption under Notification No. 339/85-Cus. was unavailable. The same contravention also supported imposition of penalty under the Customs Act.

---

---

Issues: (i) Whether import of lycra yarn was unauthorised for want of a requisite import licence and liable to confiscation; (ii) whether exemption under Notification No. 339/85-Cus. dated 21-11-1985 was available; (iii) whether the penalty imposed was sustainable.

Issue (i): Whether import of lycra yarn was unauthorised for want of a requisite import licence and liable to confiscation.

Analysis: Units in Export Processing Zones were permitted to import goods under OGL No. 20/90 subject to conformity with the Letter of Approval, Letter of Intent or Industrial Licence. The imported lycra yarn was not covered by the approved project report or the Letter of Approval, and the importer had itself sought amendment before filing the bill of entry. Import of goods not conforming to the licence description was treated as prohibited under the Imports Control Order, 1955 and, by operation of Section 3(2) of the Imports and Exports (Control) Act, 1947, as prohibition under the Customs Act.

Conclusion: The import was unauthorised and the confiscation was upheld.

Issue (ii): Whether exemption under Notification No. 339/85-Cus. dated 21-11-1985 was available.

Analysis: The notification granted exemption only where the goods were covered by the necessary licence and the importer satisfied the prescribed conditions. Since the import was not covered by the requisite licence under the applicable EPZ import regime, the condition relating to licensed import was not met. The importer also did not satisfy the condition requiring use of the goods within the Zone for production of export goods.

Conclusion: The exemption was not available and the duty demand was confirmed.

Issue (iii): Whether the penalty imposed was sustainable.

Analysis: Once the import was found to be unauthorised and contrary to the licensing conditions, the consequence of penalty under the Customs Act followed from the established contravention.

Conclusion: The penalty was upheld.

Final Conclusion: The appeal failed in full, with confiscation, duty demand and penalty all sustained.

Ratio Decidendi: Goods imported into an Export Processing Zone must conform to the licence and project approval conditions, and import contrary to those conditions is prohibited for customs purposes, defeating any exemption that is conditional on a valid licence.

---