Customs duty liability on transfer of unit survives unless successor assumption is proven; proportional demand needs fresh reconsideration.

Transfer of a duty-free import unit does not, by itself, shift customs duty liability or export-obligation liability to the successor company unless the department's acceptance of that transfer is shown and the successor has validly assumed the bond obligations; that contention failed. The plea that the duty demand should be computed proportionately to the value-addition shortfall under the CBEC circular had not been examined by the appellate authority, and the original authority had not addressed conformity with the circular; that issue required fresh consideration and was remanded for reconsideration.

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Issues: (i) Whether the liability arising from duty-free imports and export obligation could be shifted to the successor company on transfer of the unit. (ii) Whether the demand had to be worked out proportionately in terms of the value addition shortfall in accordance with the CBEC circular.

Issue (i): Whether the liability arising from duty-free imports and export obligation could be shifted to the successor company on transfer of the unit.

Analysis: The appellant had availed duty-free imports against an export-related bond and was required to satisfy the prescribed value addition. The transfer of the unit by itself did not establish that the legal obligations under the bond stood transferred to the purchaser. No material showed that the customs department had accepted the successor as liable or that the successor had stepped into the appellant's obligations in a manner binding on the department.

Conclusion: The liability was not shown to have shifted to the successor company, so this contention failed.

Issue (ii): Whether the demand had to be worked out proportionately in terms of the value addition shortfall in accordance with the CBEC circular.

Analysis: The plea that the duty demand should be restricted to the proportionate shortfall in value addition was not examined by the appellate authority. The original authority had noted the percentage shortfall but had not dealt with whether the demand conformed to the CBEC guidelines. This aspect required fresh consideration.

Conclusion: The matter on proportional computation of demand was required to be reconsidered by the original authority.

Final Conclusion: The challenge to successor liability was rejected, but the demand required fresh examination on the aspect of proportional quantification, resulting in remand of that issue.

Ratio Decidendi: Transfer of a business unit does not, by itself, extinguish the transferor's customs duty liability unless the legal obligation is shown to have been validly assumed by the successor, and an unaddressed plea on statutory or circular-based quantification warrants remand for fresh decision.

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