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(d) Considering the plea that the EXIM Policy and corresponding customs notifications do not contemplate actual use, it is found :

(i) The licences covered by the present proceedings have been issued between 1 March 1994 and 30 June 1998. The advance licences and the connected DEEC books have been issued under Notfn. Nos. 204/92, 80/95 and 149/95.
(ii) Notfn. No. 204/92-Cus dtd. 19 May 1992, grants exemption from the whole of the customs duty and the whole of additional duty to materials imported against an advance licence issued on or before 31 March 1995, subject to the conditions stipulated therein. Explanation (iv) to the Notification defines the term 'material' to mean raw materials, components, intermediates, consumables, computer software and parts required for manufacture of export product. The key words to be noted in the said Notification are 'required for manufacture of the export product'.
"236. Only those items of raw material, components, consumables, as are relevant and actually required for manufacture of the resultant product for export...:"

(ix) It will be clear from a combined reading of Paras 231 and 236 that duty free benefit was available only to raw materials, etc. actually required for the manufacture of the resultant product.

(x) Notfn. No. 159/90 was issued in furtherance of the 1990-93 Policy defining the term 'material' to mean the goods, which are raw material, components, intermediate products or consumables used in the manufacture of the resultant product. Thus, actual use of the inputs in the export product was a mandatory requirement under the advance licences issued in the Policy period 1990-93.

(e)(i) The question whether the materials permitted for import should be physically incorporated in the export product was examined by the Central Board of Excise & Customs. In particular, the extent of nexus between the input and the export product was examined. This issue was examined by the CBEC in the context of the Value Based Advance Licence Scheme and the corresponding Customs Notifications No. 203/92-Cus dtd. 19.5.1992.

The said Notification exempted materials imported into India against a Value Based Advance Licence from the basic and additional duty of customs subject-to the conditions specified therein. Explanation (iii) to the said Notification defined the term 'materials' to mean raw materials, components, intermediates, consumables, computer software and parts required for manufacture of export product. The definition of the term 'materials' in Notfn. No. 203/92-Cus is identical to the definition of the said term in Notfn. No. 204/92-Cus applicable to Quantity Based Advance Licences. CBEC issued another Circular vide Circular No. 4/93 dtd. 4.3.93 in the context of Notfn. No. 203/92. This Circular was issued in the context of the insistence of Customs field formations 'seeking to establish a detailed nexus of inputs with reference to export product' and insisting 'that the material imported must be actually utilized in the manufacture of the goods to be exported', clarified as under :