Exemption notification compliance: duty applies to unutilised imported goods, but penalty needs proof of wilful evasion.

Imported truck components remained unutilised in the manufacture of export goods, so duty under Notification No. 77/80 was held payable because mere closure of the factory did not bring the case within the notification's waiver condition. The duty demand was therefore sustained. Penalty, however, was not maintainable because the record did not show any wilful attempt to evade duty or deliberate default by the importer, and the punitive component was set aside.

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Issues: (i) whether duty was payable on imported truck components not utilised in the manufacture of export goods under Notification No. 77/80; (ii) whether penalty was sustainable in the absence of any wilful attempt to evade duty.

Issue (i): Whether duty was payable on imported truck components not utilised in the manufacture of export goods under Notification No. 77/80.

Analysis: The notification required payment of duty where the imported goods were not utilised in the manufacture of export goods, unless their non-use was attributable to deterioration or damage caused otherwise than by the importer's wilful act or negligence. The closure of the factory, for whatever reason, did not by itself justify waiver of duty when the goods remained unutilised.

Conclusion: The duty demand was upheld and the assessee was not entitled to waiver on this ground.

Issue (ii): Whether penalty was sustainable in the absence of any wilful attempt to evade duty.

Analysis: The record did not show any attempt by the importer to evade duty or to wilfully escape the obligations imposed by the notification.

Conclusion: The penalty was set aside.

Final Conclusion: The duty liability was sustained, but the punitive component was removed because wilful evasion was not established.

Ratio Decidendi: Where imported goods remain unutilised contrary to the conditions of an exemption notification, duty becomes payable, but penalty cannot be sustained unless wilful evasion or deliberate default is shown.

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