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Issues: (i) Whether duty could be recovered on goods cleared for export under bond but not exported and instead diverted, notwithstanding the limitation plea and the contention based on Rule 12 and Rule 13 of the Central Excise Rules. (ii) Whether proviso (c) to Rule 14A of the Central Excise Rules or the objection to penalty and quantification barred recovery of duty and penalty.
Issue (i): Whether duty could be recovered on goods cleared for export under bond but not exported and instead diverted, notwithstanding the limitation plea and the contention based on Rule 12 and Rule 13 of the Central Excise Rules.
Analysis: Goods removed for export without payment of duty under Rule 13 are not exempt from duty if the export is not carried out. Where the goods are diverted after clearance and the facts show a pre-planned misuse of the export procedure, the department may recover duty under Section 11A of the Central Excise Act, 1944. The plea that the demand was barred because the notice was issued after the period mentioned in Rule 12 was rejected, since the operative liability arose from the failure to export the goods that had been cleared under bond.
Conclusion: The duty demand was recoverable and the limitation objection failed.
Issue (ii): Whether proviso (c) to Rule 14A of the Central Excise Rules or the objection to penalty and quantification barred recovery of duty and penalty.
Analysis: Proviso (c) to Rule 14A was held not to create any waiver of duty where the goods had not been exported. Mere storage of the goods in a bank godown did not amount to accounting for the goods to the satisfaction of the Collector in the sense required by the rule. The demand was upheld on the full disputed quantity, and the penalty was sustained because the notice itself disclosed the charge of deliberate diversion and the record showed awareness at the management level.
Conclusion: The proviso did not protect the appellants and the penalty and full duty demand were upheld.
Final Conclusion: The liability to duty on goods falsely shown as exported was affirmed, the challenge to the demand and penalty failed, and the appeal was rejected.
Ratio Decidendi: Goods cleared without payment of duty for export under bond remain duty liable if they are not exported, and a proviso to the recovery rule cannot be used to imply a waiver of duty or penalty in the absence of actual export and proper accounting.
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