Export-oriented import exemption: duty demand and redemption fine were unwarranted where capital goods stayed in the factory and no misuse was shown.

Imported capital goods covered by an export-oriented exemption notification were found to have remained within the factory, with no misuse alleged and no prescribed time limit for duty recovery in the notification. On those facts, the Tribunal treated the demand of customs duty and the redemption fine as unwarranted and set them aside. It also noted the importer's statement that it was not interested in redeeming the goods, while leaving open liability for duty, penalty or fine if redemption was later pursued.

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Issues: Whether customs duty and redemption fine were sustainable when the imported capital goods were installed in the factory, the unit had ceased operations after a short period, no misuse of the goods was alleged, and the appellants stated that they were not interested in redeeming the goods.

Analysis: The import was under Notification No. 77/80-Cus. for setting up a 100% export oriented unit, and the record showed that the machinery remained within the factory premises. No allegation of misuse of the capital goods was made. The Tribunal noted the statement that the appellants were not interested in redeeming the goods and also observed that no time limit for recovery of duty in the circumstances was prescribed in the notification. In these facts, the demand of duty and imposition of redemption fine were held to be unwarranted.

Conclusion: The demand of customs duty and the redemption fine were set aside, and the matter was decided in favour of the assessee.

Final Conclusion: The order of the adjudicating authority was annulled, though the appellants were left liable to pay the adjudged duty, penalty or fine if they later opted to redeem the goods.

Ratio Decidendi: Where imported capital goods covered by an export-oriented exemption notification remain in the factory, are not shown to have been misused, and the importer disclaims redemption, a duty demand and redemption fine are not justified on the facts of the case.

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