Export goods duty liability falls away on proof of post-redemption export; penalties fail absent connivance, while transporter penalty stands.

Duty on inputs and final products relatable to seized export cartons does not survive if the cartons, after redemption, are subsequently shown to have been exported. The duty issue concerning the balance 399 cartons was therefore remanded for verification of actual post-redemption export. Penalties on the assessee and its director were set aside because the record did not establish connivance or diversion by them, and they were treated as victims of the fraud. The transporter's penalty was upheld because evidence supported active participation in breaking seals, changing labels, and facilitating diversion to the local market.

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Issues: (i) whether duty on the raw materials and final products relatable to the balance 399 cartons was payable if those cartons, after redemption, were subsequently exported; (ii) whether penalties imposed on the assessee and its director were sustainable; and (iii) whether the penalty imposed on the transporter was justified.

Issue (i): whether duty on the raw materials and final products relatable to the balance 399 cartons was payable if those cartons, after redemption, were subsequently exported.

Analysis: The consignment was initially cleared for export under proper documentation and the seized 399 cartons were released on payment of redemption fine. The decisive factual question was whether those cartons were thereafter actually exported. If the goods were in fact exported after redemption, the duty liability on the raw materials and the final products would not arise.

Conclusion: The question of duty liability on the balance 399 cartons was remanded for verification, and duty would not be payable if their subsequent export is established.

Issue (ii): whether penalties imposed on the assessee and its director were sustainable.

Analysis: The record did not show that the assessee was a conniving party to the diversion. The evidence showed that the goods were tampered with and diverted by others, while the assessee itself was treated as a victim of the fraud. In these circumstances, the penalties imposed on the assessee and its director could not be sustained.

Conclusion: The penalties imposed on the assessee and its director were set aside.

Issue (iii): whether the penalty imposed on the transporter was justified.

Analysis: The transporter's role in breaking seals, changing labels, and facilitating diversion to the local market was supported by the evidence on record. The active connivance of the transporter with the intending agent was established.

Conclusion: The penalty imposed on the transporter was upheld.

Final Conclusion: The appeals were partly allowed by remanding the duty aspect concerning the balance 399 cartons, setting aside the penalties on the assessee and its director, and sustaining the penalty on the transporter.

Ratio Decidendi: Where export goods are subsequently shown to have been exported after redemption, duty on the related inputs and final products does not survive, and penalties cannot be sustained in the absence of evidence of connivance.

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