2006 (10) TMI 319 - AT - Central Excise

Summary

Issues Involved:
Demand of duty on goods returned to the factory under bond.
Verification of goods under Rule 173M of the Central Excise Rules, 1944.
Imposition of penalty.

Analysis:

1. Demand of duty on goods returned to the factory under bond:
The issue revolved around the demand of duty on goods returned to the factory under bond. The appellant argued that the goods were rejected by foreign buyers due to quality issues, leading to the need for repacking and relabeling. The appellant contended that since the departmental officers did not verify the goods within the required timeframe, the duty demand was not justified. The appellant cited a previous decision to support their case. The Tribunal found merit in the appellant's arguments and set aside the demand for duty, emphasizing the lack of verification by the departmental officers.

2. Verification of goods under Rule 173M:
The Tribunal examined Rule 173M of the Central Excise Rules, 1944, which pertains to the verification of goods meant for export. The proviso to Sub-clause (ii) of clause 1 of Rule 173M focuses on verifying the particulars of the goods. The appellant highlighted that the goods were intact in drums, awaiting verification by the departmental officers. Since the officers did not conduct the necessary verification and there was no evidence of diversion of goods, the Tribunal concluded that the demand for duty was unjustified. The lack of verification by the departmental officers played a crucial role in the Tribunal's decision to set aside the demand for duty.

3. Imposition of penalty:
The Revenue had imposed a penalty along with the duty demand. However, the Tribunal, after considering the arguments presented by both sides and examining the provisions of Rule 173M, concluded that since the demand for duty itself was not justified due to the lack of verification by departmental officers, the penalty was also not warranted. Therefore, the Tribunal set aside both the duty demand and the imposed penalty, ruling in favor of the appellant.

In conclusion, the Tribunal's decision favored the appellant, setting aside the demand for duty on goods returned to the factory under bond and the imposed penalty. The lack of verification by departmental officers played a significant role in the Tribunal's ruling, highlighting the importance of adherence to procedural requirements in such cases.