Exported goods returned as damaged scrap were not dutiable at that stage, and penalty was unsustainable.

Duty was not payable on granite slabs cleared under bond for export when the export failed due to an accident in transit and the goods were returned damaged as scrap, because they had not been cleared for home consumption and had become scrap only on return. The applicable liability would arise only if the returned goods were later cleared from the factory for home consumption. As there was no duty liability on the facts then existing and the return was made with prior permission and intimation, penalty was not sustainable.

---

---

Issues: Whether duty was payable on granite slabs cleared for export under bond but returned damaged as scrap, and whether penalty was imposable.

Analysis: The goods were admittedly cleared for export under bond, the export failed because of an accident in transit, and the returned goods were examined in the presence of Central Excise officers. The goods were not cleared for home consumption at any stage and had become scrap on return. The change in character of the goods from granite slabs to granite scrap occurred because of the accident, and duty would arise only when the goods, in their returned form, were subsequently cleared from the factory for home consumption. On the admitted facts, there was no violation in the original export clearance or in bringing the damaged goods back with prior permission and intimation. As no duty liability had arisen on the facts then existing, there was no basis for penalty.

Conclusion: Duty was not payable on the returned goods at that stage, and penalty was not sustainable.

---