Duty-free goods diversion and forged re-warehousing papers required fresh scrutiny before supplier liability could be fixed.

Duty-free goods cleared under Chapter X against CT-3 certificates were diverted and the re-warehousing documents were forged, but the record did not adequately prove that the supplier EOUs knew of, participated in, or were otherwise responsible for the forgery and diversion. The order emphasised that the purchaser had the primary obligation to account for the goods and pay duty if they were not duly accounted for, while liability against the suppliers and invocation of the extended period required proper evidentiary support. As the documentary irregularities originated at the receiving end and the evidentiary basis was insufficiently examined, the demand and penalties were not finally sustained on the existing record and the matter was remanded for fresh adjudication.

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Issues: Whether the demand of duty and penalty against the supplier EOUs was sustainable in view of the alleged diversion of duty-free goods and the alleged forgery at the receiving end, and whether the matter required reconsideration for want of sufficient evidence and proper appreciation of the legal responsibility under the exemption procedure.

Analysis: The goods were admittedly diverted and the re-warehousing and related documents were found to be forged, but the record did not satisfactorily establish that the supplier units were aware of the forgery or were shown by corroborative evidence to have participated in the diversion. The bond and the Chapter X procedure indicated that, once goods were cleared against CT-3 certificates, the purchaser had obligations to account for the goods and to pay duty if the goods were not duly accounted for. The order also noted that the documentary irregularities originated at the receiving end, while the evidentiary basis for fastening liability on the suppliers and invoking the extended period against them was not adequately discussed or proved. In these circumstances, the existing findings were held to require fresh examination by the Original Adjudicating Authority.

Conclusion: The demand and penalties against the appellants were not finally sustained on the existing record, and the matter was sent back for fresh adjudication.

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