1987 (4) TMI 349 - AT - Central Excise

Court rules duty payment liability under Chapter X rests with buyer-factory, not manufacturer. Buyer bears duty responsibility under concession.

The court held that the duty payment liability for goods removed under Chapter X procedure rests with the buyer-factory, not the manufacturing company. ... Demand - Chapter X Issues:The issues involved in the judgment are the liability of duty payment for goods removed under Chapter X procedure, responsibility of manufacturers for duty payment, applicability of Section 11A of the Central Excises and Salt Act, and the transfer of duty responsibility from the manufacturing factory to the buyer-factory under concession notifications.Liability of Duty Payment for Goods Removed under Chapter X Procedure:The counsel for the company argued that they are not responsible for duty payment as the goods were removed under Chapter X procedure for further manufacture of motor vehicles. The removals were under Notifications 74/79-C.E., 75/79-C.E., and 167/79-C.E., which required following the procedure set out in Chapter X. The Chapter mandates that the applicant must pay duty on goods not accounted for as required by law. The responsibility for proper accountal of goods obtained under concession lies with the applicant, not the seller.Responsibility of Manufacturers for Duty Payment:The Assistant Manager contended that they had no control over how the goods were used after leaving the factory, emphasizing that the concession was granted to the applicant/user who must ensure proper usage as per rules. The manufacturer cannot be held liable for duty payment if the goods are misused by the buyer, as the law places the responsibility on the applicant to use the goods appropriately.Applicability of Section 11A of the Central Excises and Salt Act:The appellant argued that duty was demanded under Section 11A, holding the manufacturers liable until the goods are used and disposed of in accordance with the law. However, the demand under Section 11A was deemed inapplicable in this case as it pertains to short levy arising from failure to account for goods properly, not from a mistake in levy or payment.Transfer of Duty Responsibility to Buyer-Factory under Concession Notifications:The judgment highlighted that the duty responsibility for goods cleared under concession is transferred from the manufacturing factory to the buyer-factory as per Notifications 74/79-C.E., 75/79-C.E., and 167/79-C.E. This transfer of duty responsibility is a prudent provision to prevent double receipt of duty on the same goods and to ensure accountability lies with the buyer-factory.The demand served on the manufacturing company was deemed unjust and not in accordance with Chapter X of the law. The judgment set aside the department's proceedings seeking duty recovery from the manufacturers, emphasizing the transfer of duty responsibility to the buyer-factory under concession notifications.