Penalty under export-in-bond rules was unsustainable where goods were exported on duty payment, not under bond.

Penalty under Rule 17 of the Medicinal and Toilet Preparations (Excise Duties) Rules, 1956 could not be imposed for failure to furnish proof of export where the goods were exported on payment of duty and not under bond. Rule 17 applies only to export of dutiable goods in bond and depends on non-furnishing of proof of such export to the satisfaction of the Excise Commissioner. Rule 103 governs rebate claims and has no bearing on penalty. As the foundational condition for Rule 17 was absent, the recovery made towards penalty had no legal justification and was liable to be refunded.

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Issues: Whether penalty could be imposed under Rule 17 of the Medicinal and Toilet Preparations (Excise Duties) Rules, 1956 for alleged failure to furnish proof of export, when the goods had been exported on payment of duty and not under bond.

Analysis: Rule 17 applies to exports of dutiable goods in bond and contemplates liability where proof of such export is not furnished to the satisfaction of the Excise Commissioner. Rule 103 deals only with presentation of rebate claims and has no role in the levy of penalty. Since the goods in question were not exported under bond, the foundational requirement for invoking Rule 17 was absent. The recovery made towards penalty therefore lacked legal justification.

Conclusion: Penalty under Rule 17 could not be sustained and the amount recovered towards penalty was liable to be refunded.

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