2008 (12) TMI 111 - AT - Central Excise

Respondent-manufacturer cleared the goods for export through merchant-manufacturers, against ARE-2 - proof of export was not produced within 6 months from date of clearance neither respondent was a party to the fact of non-export by merchant-exporter not he acted in a mala fide manner to avail the benefit - there being no dispute about the genuineness of ARE 2, failure on the part of merchant-exporter would not invite any penal action against the respondent-manufacturer

Summary

Issues:
- Duty liability in case of export through merchant-exporters
- Penalty imposition under Rule 25 for failure to furnish proof of export
- Manufacturer's liability as surety for duty payment in case of non-export by merchant-exporters

Analysis:
1. Duty liability in case of export through merchant-exporters:
The respondent, a manufacturer of processed fabric and ready-made garments, cleared goods for export through merchant-exporters against ARE-2's without duty payment. The duty liability shifted from the manufacturer to the merchant-exporters who executed bonds to pay duty if goods were not exported. The Commissioner (Appeals) correctly held that duty liability rested with the merchant-exporters, not the manufacturer, and upheld the demand against the merchant-exporters. The responsibility to pay duty was on the merchant-exporters as per the bond executed by them.

2. Penalty imposition under Rule 25 for failure to furnish proof of export:
The appellant was penalized under Rule 25 for not providing proof of export within six months. However, the Commissioner (Appeals) set aside the penalties, stating that the responsibility to furnish proof of export and pay duty in case of failure rested with the merchant-exporter, not the manufacturer acting as a surety. The penalties imposed on the appellant were deemed unjustified as per Rule 19 and related instructions, absolving the manufacturer of penalty liability for non-export.

3. Manufacturer's liability as surety for duty payment in case of non-export by merchant-exporters:
In cases where goods cleared for export were not exported, the merchant-exporters were obligated to pay duty within six months. The manufacturer, acting as a surety for the merchant-exporters, would be legally liable to pay the duty if the merchant-exporters failed to do so. The manufacturer's role as a surety was highlighted, emphasizing their obligation to discharge duty payment if the merchant-exporters defaulted.

In conclusion, the Appellate Tribunal upheld the Commissioner (Appeals) order, finding no fault with the decision. The Tribunal rejected all appeals filed by the Revenue, emphasizing that penal action against the manufacturer was unwarranted in cases of non-export by merchant-exporters where the manufacturer had fulfilled their obligations in clearing goods against valid documents.