Import policy benefit for export zone units applies only to goods used for manufacture, not goods diverted to domestic sale.

An export-oriented unit in an export processing zone could invoke Paragraph 94 of the Import Policy only for goods actually required for manufacture, production or processing, and only if they were not prohibited items in the negative list. Because the importer did not take the consumer goods to the zone for such use and instead diverted them to the open market, the claimed import-policy benefit was unavailable and confiscation was sustained. The importer's early assertion of the claim and delay in clearance did not extend the exemption, but they justified relief on penalties, so the penalty was set aside and the redemption fine was reduced.

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Issues: (i) Whether an export-oriented unit in an export processing zone could claim the benefit of Paragraph 94 of the Import Policy for importing consumer goods, and whether confiscation was justified; (ii) Whether the penalty and redemption fine imposed on the importer were sustainable.

Issue (i): Whether an export-oriented unit in an export processing zone could claim the benefit of Paragraph 94 of the Import Policy for importing consumer goods, and whether confiscation was justified.

Analysis: Paragraph 94 permitted an export-oriented unit or unit in an export processing zone to import free of duty all types of goods required for manufacture, production or processing, so long as the goods were not prohibited items in the negative list. The negative list distinguished prohibited items from restricted items, and the restricted category included consumer goods, which could still be imported against licence or in accordance with the relevant public notice. On the facts, however, the importer did not take the goods to the export processing zone for use in manufacture and instead sold them in the open market. In those circumstances, the claimed protection of Paragraph 94 was not available.

Conclusion: The benefit of Paragraph 94 was not available on the facts, and confiscation was sustained.

Issue (ii): Whether the penalty and redemption fine imposed on the importer were sustainable.

Analysis: The importer had asserted the export-processing-zone claim at an early stage, and there had also been delay in clearance of the goods. While these factors did not justify extending the substantive exemption, they warranted relief in the matter of penal consequences.

Conclusion: The penalty was set aside and the redemption fine was reduced.

Final Conclusion: The importer did not establish entitlement to the exemption claimed for the goods, but obtained partial relief against the penal consequences of confiscation.

Ratio Decidendi: A unit in an export processing zone may invoke the import policy relaxation only for goods actually required for manufacture, production or processing, and the benefit is unavailable where the goods are diverted to domestic sale instead of being taken to the zone.

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