2008 (1) TMI 683 - AT - Central Excise

Summary

Issues: Liability for duty payment on fabrics procured for export but used for domestic consumption, admissibility of credit for duty paid by the supplier, potential confiscation of goods for clearance without appropriate duty payment.

In this case, the main issue revolves around the liability for duty payment on fabrics procured for export but ultimately used for domestic consumption. The respondent had procured fabrics from a supplier for export purposes without duty payment, with a joint bond stating that if the fabrics were not used for export, duty would be paid. Due to the cancellation of export orders, the goods were cleared for domestic consumption, and the supplier paid duty on the fabrics through a supplementary invoice. The respondent then took credit for this duty payment when clearing the final products domestically.

The revenue contended that the duty liability on the fabrics not used for export should be on the respondent, not the supplier who paid the duty. They argued that the duty paid by the supplier should be treated as a deposit, and the respondent should not be allowed to take credit for it. The revenue claimed that the goods should be considered as cleared without appropriate duty payment, potentially leading to confiscation.

Upon review, the Tribunal found that a joint bond had been executed by both the supplier and the respondent, agreeing to pay duty if the fabrics were not used for export. Since the supplier had already paid the duty, the Tribunal held that it was not appropriate to demand duty payment again from the respondent. The Tribunal emphasized that there was no revenue loss as the respondent would have been entitled to credit for the duty paid by the supplier when clearing the final products domestically. Consequently, the Tribunal upheld the Commissioner (Appeals) order and rejected the revenue's appeal, concluding that there was no basis to interfere with the decision.