Duty demand overturned as user unit, not supplier, responsible for duty-free certificates

The Tribunal held that the duty demand against the appellants was unsustainable as the obligation to obtain material duty-free against CT-3 certificates rested with the user unit, not the supplier. The impugned order was set aside, and the appeal was allowed, absolving the appellants of the duty demand and penalty.

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Issues:
Duty demand against the appellants for clearance of goods without CT-3 certificates under an exemption notification.

Analysis:
The appellants, manufacturers of electrical relays, cleared goods to an EHTP unit under an exemption notification. The dispute arose when a quantity of relays was cleared without CT-3 certificates. The department issued a show cause notice for recovery of duty and penalty, alleging that the clearances were not eligible for the concessional rate of duty. The Commissioner confirmed the demand and imposed a penalty, leading to this appeal.

Upon hearing both sides, it was established that all goods were sent to the EHTP unit with proper documentation, including AR-3A forms for re-warehousing. The AR-3A forms were duly endorsed by Customs authorities, confirming re-warehousing. The department did not dispute that the goods were used for the intended purposes at the EHTP unit. The obligation to obtain material duty-free against CT-3 certificates rested with the user unit, not the supplier. As the goods were warehoused at the user industry, duty liability could only be raised against the user industry, as per Rule 20(3) of the Central Excise Rules, 2002, not the supplier.

Therefore, the Tribunal held that the duty demand against the appellants was unsustainable. The impugned order was set aside, and the appeal was allowed, absolving the appellants of the duty demand and penalty. The judgment was pronounced on 21st March 2005.

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