Warehouse-certified imports: duty demand and penalty were held unsustainable where credit recipients were not proceeded against.

Imported goods brought into a registered warehouse under customs endorsement and certification, with the warehouse bills of entry later cancelled by the proper jurisdictional officer, could not support a duty demand against the importer on the facts stated. The text further notes that no proceedings were taken against the customers who had already availed credit, which reinforced the conclusion that the demand was unsustainable. Correspondingly, the penalty under Section 11AC of the Central Excise Act, 1944 and the invocation of Rule 173Q(bbb) were also found not supportable, and the appeal was allowed.

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Issues: Whether the duty demand and penalty were sustainable where the imported goods were taken into the assessee's warehouse, endorsed and certified by the customs authorities, the warehouse entries were cancelled by the jurisdictional superintendent, and no action had been taken against the customers who had availed credit.

Analysis: The imported goods were received in the assessee's registered warehouse after endorsement on the reverse of the bill of entry and certification by the customs officer at the port. The bills of entry were subsequently cancelled by the superintendent having jurisdiction over the registered warehouse. In addition, the customers who had availed the credit were not proceeded against and no duty demand had been raised against them. On these facts, the demand raised against the assessee was held to be unsustainable. The penalty imposed under Section 11AC of the Central Excise Act, 1944 and the invocation of Rule 173Q(bbb) were, consequently, not supportable.

Conclusion: The duty demand and penalty were not sustainable and the appeal was allowed.

Ratio Decidendi: Where the imported goods are duly brought into a registered warehouse under customs certification and the statutory records are cancelled by the proper officer, a duty demand against the importer cannot be sustained in the absence of any proceedings against the recipients who availed credit.

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