Advance licence imports used for domestic replenishment: absence of prior permission treated as a technical breach, not a substantive violation.

Imported inputs taken duty-free under an advance licence may be used for domestic replenishment where the export obligation has been met and the import policy conditions are substantially satisfied. The exemption condition against sale, transfer or diversion required prior permission, but on these facts the goods were not shown to have been diverted to third parties. Failure to obtain prior permission was treated as a procedural lapse rather than a substantive breach, so the contravention was only technical and did not justify confiscatory or penal action. The order dropping further proceedings was therefore sustained and the revenue challenge failed.

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Issues: Whether imported inputs taken duty-free against an advance licence could be used for domestic replenishment without prior permission of the Committee, and whether such use amounted only to a technical contravention warranting interference with the order dropping proceedings.

Analysis: Notification No. 117/78 dated 09.06.1978 exempted specified imports against an advance licence subject to a condition against sale, transfer, disposal or similar diversion without prior permission. The imported material was not shown to have been diverted to third parties. In the context of the liberalised import policy, the advance licensing scheme and Public Notice No. 156 dated 19.02.1987, replenishment use for domestic production was treated as permissible where the export obligation had been met and the policy conditions were substantially satisfied. The failure to obtain prior permission was therefore treated as a procedural lapse rather than a substantive breach.

Conclusion: The absence of prior permission did not justify reversal of the order under challenge, and the contravention was only technical.

Final Conclusion: The order dropping further proceedings was sustained and the revenue challenge failed.

Ratio Decidendi: Where imported goods are used consistently with the advance licensing and import policy framework and there is no diversion to third parties, non-obtaining of prior permission under the exemption condition is only a technical breach and does not warrant substantive confiscatory or penal action.

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