Export goods cleared under bond: manufacturer not liable for penalty when merchant-exporter fails to complete export.

Goods cleared for export under bond through merchant-exporters do not, by themselves, attract duty or penalty on the manufacturer when the goods are not ultimately exported. The obligation to furnish proof of export and to meet duty liability on non-export rests primarily on the exporter who executes the bond, and the manufacturer's liability is not established absent mala fide participation or dispute over the genuineness of the ARE-2 documents. Since the manufacturer cleared the goods under proper export documents and no culpable involvement was shown, penal action under Rule 25 was not warranted.

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Issues: Whether duty and penalty could be fastened on the manufacturer when goods cleared for export through merchant-exporters were not actually exported.

Analysis: Goods were cleared for export under bond through merchant-exporters, and the record did not show any mala fide participation by the manufacturer in the failure to export. Under the export scheme, the obligation to furnish proof of export and to discharge the duty liability on non-export primarily rests on the exporter who executes the bond. Where the manufacturer has cleared goods against proper ARE-2 documents and there is no dispute as to their genuineness, the subsequent failure of the merchant-exporter to complete export does not by itself justify penal action against the manufacturer. The liability of a surety arises only in the event of default by the principal obligor, and the appellate authority had already held that penalty under Rule 25 was not warranted.

Conclusion: The manufacturer was not liable to be penalised merely because the merchant-exporter failed to export the goods, and the demand was not to be interfered with.

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