Duty-free export under bond prevails over job-worker clearance, while personal penalty fails without proof of conscious dealing.
Goods processed through job workers and exported under bond by a person registered under Rule 12B were not liable to duty where export was duly completed under ARE-I and proof of export was on record. Rule 19 permitted export of excisable goods without payment of duty from approved premises, and the reference in Rule 12B(2) to duty payment for clearance from a job worker's premises did not override that entitlement once the prescribed bond procedure and export conditions were satisfied. Confiscation for alleged non-accountal was upheld, but the redemption fine was reduced to Rs. 10,000 on proportionality grounds. Penalty on the Director under Rule 26 was set aside because the required knowledge or reason to believe that the goods were liable to confiscation was not established.
Issues: (i) whether goods processed through job workers and exported under bond by a person registered under Rule 12B of the Central Excise Rules, 2002 were liable to duty; (ii) whether the seizure and confiscation of stock for alleged non-accountal warranted redemption fine; and (iii) whether penalty on the Director under Rule 26 of the Central Excise Rules, 2002 was sustainable.
Issue (i): whether goods processed through job workers and exported under bond by a person registered under Rule 12B of the Central Excise Rules, 2002 were liable to duty.
Analysis: The registered person was to be treated as a manufacturer for practical purposes, and the export was admittedly made under ARE-I with proof of export on record. Rule 19 permitted export of excisable goods without payment of duty from approved premises. The mere reference in Rule 12B(2) to payment of duty for clearance from a job worker's premises did not override the export entitlement where the prescribed bond procedure had been followed and the export conditions stood satisfied.
Conclusion: The duty demand and consequential interest and equal penalty on the assessee were not sustainable and were set aside.
Issue (ii): whether the seizure and confiscation of stock for alleged non-accountal warranted redemption fine.
Analysis: Although the stock register was not produced at the time of visit, it was subsequently produced and the explanation was that it had been sent to the head office for computerisation. The confiscation was not interfered with, but the quantum of redemption fine had to bear proportion to the duty involved and the circumstances of the case.
Conclusion: Confiscation was upheld, but the redemption fine was reduced to Rs. 10,000.
Issue (iii): whether penalty on the Director under Rule 26 of the Central Excise Rules, 2002 was sustainable.
Analysis: Rule 26 applied only where a person dealt with excisable goods knowing or having reason to believe that they were liable to confiscation. On the facts found, the requisite ingredients for fastening personal penalty on the Director were not made out.
Conclusion: The penalty imposed on the Director was set aside.
Final Conclusion: The assessee obtained substantial relief as the duty demand, interest, and equal penalty were annulled and the personal penalty on the Director was removed, while confiscation of the goods was maintained with only the redemption fine being reduced.
Ratio Decidendi: Where export of excisable goods under bond is duly effected in compliance with Rule 19, duty cannot be demanded merely because clearance was from a job worker's premises under Rule 12B; personal penalty requires proof of conscious dealing with goods known to be liable to confiscation.
TaxTMI 
AI Drafter ✕
TaxTMI 
