Export duty compliance: penalties set aside where annual renewal of the Letter of Undertaking was not required by notification.

Penalties for export without payment of Central Excise duty could not be sustained where the governing notification permitted filing of a Letter of Undertaking in lieu of bond and did not require annual renewal. A departmental manual or supplementary instruction could clarify the scheme, but it could not add a condition absent from the notification or restrict its scope. As the underlying demand had already been set aside, the foundation for the penalties disappeared. The impugned order was therefore annulled to the extent it upheld the penalties, and the appeals were allowed.

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Issues: Whether penalties could be sustained on the ground that the Letter of Undertaking furnished for export without payment of duty was not renewed every year, despite the absence of any such requirement in the governing notification.

Analysis: The notification governing export without payment of Central Excise duty permitted a manufacturer-exporter to furnish a Letter of Undertaking in lieu of bond. It did not prescribe any requirement that the LUT be renewed annually. A departmental manual or supplementary instruction could only clarify the statutory scheme and could not curtail the scope of the notification or add a condition not found in it. Since the demand itself had already been set aside, the basis for sustaining the penalties did not survive.

Conclusion: The penalties were unsustainable and were set aside; the appellants succeeded.

Final Conclusion: The impugned order was annulled to the extent it upheld the penalties, and the appeals were allowed.

Ratio Decidendi: Executive instructions cannot impose a condition or restriction that is absent from the governing notification, and a penalty founded solely on such an requirement cannot be sustained.

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