Duty-free removal of intermediate goods under advance licence scheme sustained where authorities knew and permitted clearances.

Notification No. 49/94-CE allowed duty-free clearance of intermediate goods where the manufacturer held, applied for, or was permitted under the relevant advance licence framework to supply goods for an export-linked entitlement scheme. On the facts recorded, the exporter held advance licences, the supporting units were endorsed in the DEEC books by the licensing authority, the Central Excise authorities issued CT-2 certificates, and the removals were reflected in RT-12 returns. As there was no allegation of clandestine removal or misappropriation, the condition in the notification was treated as satisfied and the duty demand and penalties were held unsustainable.

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Issues: Whether the manufacturers of intermediate goods and the exporter had violated Condition No. (i) of Notification No. 49/94-CE dated 22-9-1994 so as to sustain the demand of duty and imposition of penalty.

Analysis: The notification permitted removal of intermediate goods without payment of duty if the manufacturer held an advance intermediate licence, had applied for it and obtained acknowledgement, or had been permitted by the licensing authority to manufacture for supply to a holder of a duty exemption entitlement certificate and advance licence. The record showed that the exporter had advance licences, the names of the supporting units were endorsed in the DEEC books by the licensing authority, the Central Excise authorities had issued CT-2 certificates, the removals were reflected in RT 12 returns, and there was no allegation of misappropriation or clandestine removal. On these facts, the goods were manufactured and removed with the knowledge and permission of the competent authorities, and the condition of the notification stood satisfied.

Conclusion: The duty demand and penalties were not sustainable and were set aside in favour of the assessees.

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