Duty demand on receiver of inputs fails where liability lies with manufacturer and Modvat credit neutralises any revenue loss.

Duty could not be demanded from the receiver of inputs merely because the stock was found in excess, as liability for allegedly non-duty-paid inputs lay against the manufacturer and not the recipient. Section 11A read with Rule 9(2) did not authorise recovery from the receiver in these circumstances. The inputs were entered in RG-23A Part-I without corresponding Part-II credit, and had already been used in the manufacture of final products cleared on payment of duty. Even if duty had been confirmed, Modvat credit under Rule 57E would have been available, leaving no revenue loss. The demand was therefore unsustainable and the orders were set aside.

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Issues: Whether duty could be demanded from the receiver of inputs found in excess stock under Section 11A read with Rule 9(2), and whether the receiver would be entitled to Modvat credit under Rule 57E if duty were confirmed.

Analysis: The inputs were not manufactured by the appellant and were entered in the RG-23A Part-I Register without any corresponding Part-II credit. The demand proceeded on the assumption that the goods had not suffered duty, but the liability in such a case lay against the manufacturer of the inputs and not against the recipient. Section 11A read with Rule 9(2) did not authorise recovery from the receiver of the alleged non-duty paid goods. In any event, since the inputs had been used in the manufacture of final products cleared on payment of duty, confirmation of duty against the appellant would have given rise to Modvat credit under Rule 57E, resulting in no revenue loss.

Conclusion: The duty demand could not be fastened on the appellant receiver, and the impugned orders were set aside.

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