Duty demand and penalty unsustainable where forged re-warehousing certificates were not shown to involve the manufacturer.

Duty demand and penalty were held unsustainable against the manufacturer where duty-free goods were cleared against CT-3 certificates to a 100% EOU and the re-warehousing certificates later proved forged. The record showed no material that the manufacturer prepared the forged certificates, participated in their fabrication, or had any role in diversion of the goods to the local market. Responsibility for receipt, storage, utilisation, and any duty liability for failure to use the goods for export purposes lay with the 100% EOU, not the supplier-manufacturer. In the absence of evidence linking the manufacturer to the forgery or diversion, penalty also could not be sustained.

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Issues: Whether duty demand and penalty could be sustained against the manufacturer when duty-free goods were cleared against CT-3 certificates to a 100% EOU and the re-warehousing certificates later turned out to be forged and the goods were diverted to the local market.

Analysis: The clearance was made on the strength of CT-3 certificates and the re-warehousing certificates were produced by the consignee 100% EOU. There was no material to show that the appellant had prepared the forged certificates or had any role in their fabrication or in the diversion of the goods. The liability to account for receipt, storage, utilisation, and any duty demand on failure to use the goods for export purposes lay with the 100% EOU, not with the supplier-manufacturer. In the absence of evidence of involvement in the forgery or diversion, penalty also could not be sustained.

Conclusion: Duty demand and penalty against the appellant were not sustainable.

Final Conclusion: The impugned order was set aside and the appeal was allowed with consequential relief.

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