B17 bond liability limits duty exposure on indigenous procurements, while penalty is unsustainable absent mala fide conduct.
In the absence of a specific exemption for indigenously procured goods, duty was held payable under the STPI arrangement, and the appellant's liability was fastened only to the extent covered by the B17 bond executed to discharge duty and interest. The demand was not barred by limitation because the bond contemplated provisional assessment and payment on demand. Penalty was, however, set aside, as the clearances were made on the basis of official certificates and no mala fide conduct was shown. The appeal therefore succeeded only in restricting the demand to the bond amount and deleting the penalty, while the underlying duty liability was upheld.
Issues: (i) Whether duty was payable on indigenously procured goods in the absence of a specific exemption, and whether the appellant's liability could be fastened under the B17 bond; (ii) Whether the demand was barred by limitation and whether penalty was sustainable.
Issue (i): Whether duty was payable on indigenously procured goods in the absence of a specific exemption, and whether the appellant's liability could be fastened under the B17 bond.
Analysis: The permission granted under the STPI arrangement and the certificate issued by the departmental officer did not create a separate exemption for goods procured from Indian manufacturers. The goods cleared by the indigenous suppliers were not covered by any exemption notification, and the appellant had executed a B17 bond undertaking to discharge duty and interest liabilities. In these circumstances, the duty liability fell upon the appellant to the extent covered by the bond.
Conclusion: The duty demand was sustainable in principle, but the appellant's liability was confined to the amount covered by the B17 bond.
Issue (ii): Whether the demand was barred by limitation and whether penalty was sustainable.
Analysis: The bond itself contemplated provisional assessment and contained an undertaking to pay duty on demand, which negatived the limitation objection raised against the demand within the contractual and procedural framework. However, the clearances had been made on the basis of certificates issued by the authorities, and the record did not show mala fide conduct warranting penal action.
Conclusion: The limitation objection was rejected, but the penalty was not justified and was set aside.
Final Conclusion: The appeal succeeded only to the extent of restricting the demand to the bond amount and deleting the penalty, while the underlying duty liability was otherwise upheld.
Ratio Decidendi: In the absence of a specific exemption for indigenous procurements, a liability undertaken under a B17 bond can fasten duty liability on the assessee, but penalty is not warranted where the clearances were made on the basis of official certificates and no mala fide is established.
TaxTMI 
AI Drafter ✕
TaxTMI 
