Chapter X duty liability on breach falls on the user, not the manufacturer, under the exemption conditions and licence rules.

Breach of the conditions attached to goods received under Chapter X procedure placed the duty burden on the user or L-6 licensee, not on the manufacturer. Notification No. 56/78-C.E. made the undertaking the responsibility of the owner or user of the air conditioner and stated that, on breach, the exempted duty portion would be paid on behalf of the manufacturer. Rule 196 likewise required the applicant for the licence to pay duty where goods were not duly accounted for or used in the prescribed manner. Read together, the notification and rules fixed liability for default or misuse on the person obtaining the goods under the procedure.

---

---

Issues: Whether, on breach of the conditions attached to goods received under Chapter X procedure, the duty liability fell on the user of the goods or on the manufacturer.

Analysis: Notification No. 56/78-C.E. granted partial exemption to room air conditioners subject to specified conditions. The undertaking contemplated by the notification was to be furnished by the owner or user of the air conditioner, and the condition expressly provided that in the event of breach of the terms of the undertaking, the person concerned would pay the portion of duty exempted under the notification on behalf of the manufacturer. The Chapter X procedure likewise required the applicant for remission to obtain the licence, execute the bond, and receive the goods under the prescribed certificate. Rule 196 provided that where goods obtained under Rule 192 were not duly accounted for or otherwise satisfied as having been used in the prescribed manner, the duty was to be paid by the applicant for the licence. The combined effect of the notification and the rules was that liability for default or misuse rested on the user who obtained the goods under the procedure.

Conclusion: The duty liability in case of violation lay on the user or L-6 licensee and not on the manufacturer; the Revenue's appeal succeeded and the contrary view was rejected.

---