Confiscation of duty-free imports follows breach of exemption conditions and export obligation; Rule 209 requires specified status.

Duty-free imports into an export-oriented zone became liable to confiscation when the exemption conditions were breached and the export obligation remained unfulfilled, because the goods were not used for manufacture of export goods. Duty liability was to be reconsidered on depreciated value at the debonding stage, with redemption fine and penalty left for fresh determination. Indigenous goods procured duty free were not liable to confiscation under Rule 209 of the Central Excise Rules, since that provision applies only to specified persons such as manufacturers, producers, registered warehouse persons, or registered dealers, and the company did not fall within those categories.

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Issues: (i) Whether the imported goods were liable to confiscation for non-fulfilment of the exemption conditions and export obligation. (ii) Whether the indigenous goods were liable to confiscation under Rule 209 of the Central Excise Rules.

Issue (i): Whether the imported goods were liable to confiscation for non-fulfilment of the exemption conditions and export obligation.

Analysis: The exemption for duty-free import into the export processing zone was conditional upon use of the goods within the zone for manufacture of export goods and compliance with the export commitment. The imported capital goods and raw materials remained unutilised and the export obligation was not fulfilled. In that situation, the conditions of the notification and the export policy were breached, attracting confiscation under the Customs Act. At the same time, the question of duty liability was to be examined on the basis of depreciated value at the stage of debonding.

Conclusion: The imported goods were liable to confiscation, but the duty liability was required to be reconsidered on depreciated value.

Issue (ii): Whether the indigenous goods were liable to confiscation under Rule 209 of the Central Excise Rules.

Analysis: Rule 209 applies to confiscation of excisable goods in the hands of specified persons such as manufacturers, producers, registered warehouse persons, or registered dealers. The company did not fall within those categories in relation to the indigenous goods procured duty free. The confiscation of those goods under Rule 209 was therefore unsustainable.

Conclusion: The indigenous goods were not liable to confiscation under Rule 209.

Final Conclusion: The confiscation of the imported goods was sustained, the confiscation of the indigenous goods was set aside, and the questions of duty on depreciated value, redemption fine, and penalty were left for fresh consideration by the adjudicating authority.

Ratio Decidendi: Duty-free goods imported into an export-oriented zone become liable to confiscation when the exemption conditions and export obligation are not fulfilled, while Rule 209 cannot be applied unless the person concerned falls within the classes specifically covered by that rule.

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