Chapter X concessional clearance: duty liability for misuse rests with the recipient, not the manufacturer.

Concessional clearance of goods under Chapter X against CT-2 certificates and prescribed bonds placed the accounting obligation on the recipient, not the manufacturer. Liability under Rule 196 arises where goods obtained under Rule 192 are not duly accounted for, and that responsibility attaches to the applicant or recipient who undertakes to use the goods for the intended purpose. On the stated facts, the manufacturer could not be fastened with duty demand for any alleged misuse or non-user by the recipient. Rule 173N was also held inapplicable. The demand against the manufacturer was therefore unsustainable, leaving the Revenue free to proceed against the recipient.

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Issues: Whether duty demand could be sustained against the manufacturer when the goods were cleared at concessional rate under Notification No. 76/88-CE pursuant to Chapter X procedure and the recipient had obtained the goods under the prescribed certificates and bonds.

Analysis: The concessional clearance was made under the Chapter X procedure, under which the excise officer issues a certificate on application and proper bond, enabling receipt of goods at concessional duty. The liability under Rule 196 arises where goods obtained under Rule 192 are not duly accounted for, and that liability falls on the applicant or recipient who undertakes to use the goods for the intended purpose. Since the goods were cleared against CT-2 certificates in favour of the recipient, the obligation to account for misuse or non-user for the specified purpose attached to the recipient and not to the manufacturer. Rule 173N was also found inapplicable on the facts.

Conclusion: The demand against the manufacturer was unsustainable and was set aside. The Revenue was left at liberty to proceed against the recipient of the goods.

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