Penalty for duty-free export clearance fails absent mala fide intent where genuine CT-1 certificate was used.

Penalty under Rule 25(d) of the Central Excise Rules, 2001 was held unsustainable where sugar was cleared without duty against a genuine CT-1 certificate issued for export, and the certificate was not shown to have been fraudulently obtained. The absence of export by the merchant exporter, without proof of mala fide intention or intent to evade duty by the assessee, was insufficient to sustain penalty. On that basis, the penalty order was set aside and relief followed in favour of the assessee.

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Issues: Whether penalty under Rule 25(d) of the Central Excise Rules, 2001 was sustainable where sugar was cleared without duty on the strength of a genuine CT-1 certificate for export, but the goods were not exported and were allegedly diverted to the domestic tariff area.

Analysis: The clearance was effected against a CT-1 certificate issued by the Maritime Commissioner, and the certificate was not shown to have been obtained by fraud. In such circumstances, the appellants could not be attributed with a mala fide intention to evade duty merely because the merchant exporter failed to complete export. Since the goods were cleared on the strength of a valid export-related document, the essential basis for penalty was absent.

Conclusion: Penalty under Rule 25(d) was not leviable and the finding imposing penalty was set aside in favour of the assessee.

Final Conclusion: The appeal succeeded and the penalty order was annulled, with consequential relief flowing from the disposal.

Ratio Decidendi: Penalty for contravention of central excise law under Rule 25(d) cannot be sustained in the absence of mala fide intention or intent to evade duty when clearance is made on the strength of a genuine export certificate not shown to be fraudulently obtained.

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