Cotton denim under transferred advance licence can qualify for exemption absent a specific technical nexus requirement.

Imported cotton denim fabric was treated as eligible for exemption under Notification No. 203/93 when cleared against a transferred advance licence for export of gents cotton shirts. The licensing conditions did not prescribe any specific technical grade or exact correspondence between the imported cotton fabric and the export product, and no requirement was shown that denim could not be used in shirt manufacture. The Department's objection based on the absence of exact technical matching was rejected, and the stated position that nexus with the exported goods need not be separately established under a transferred advance licence further supported the exemption.

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Issues: Whether imported cotton denim fabric was eligible for exemption under Notification No. 203/93 when cleared against a transferred advance licence issued for export of gents shirts.

Analysis: The imported material was cotton denim fabric, which falls within the scope of cotton fabrics. The export obligation related to gents cotton shirts, and nothing showed that denim could not be used in their manufacture. The licensing conditions did not require specification of a particular grade or kind of cotton fabric for either import or export. The Department's objection based on absence of exact technical correspondence between the imported fabric and the exported shirts was therefore unsustainable. The position that an importer under a transferred advance licence need not establish nexus with the exported goods also supported the assessee.

Conclusion: The imported goods were eligible for the benefit of exemption under Notification No. 203/93, and the appeal failed.

Ratio Decidendi: Where a notification or licence permits import of cotton fabrics and no specific technical grade or nexus requirement is prescribed, cotton denim fabric used for or capable of being used in the export product cannot be denied exemption merely for want of exact technical matching with the exported goods.

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