9911796707
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Issues:
1. Interpretation of a security bond executed in favor of the Government. 2. Liability of the surety under the security bond for non-duty paid tobacco. 3. Application of Central Excise Department rules to determine liability. 4. Continuation of surety's liability beyond the period of the license. 5. Impact of subsequent conduct of the parties on the surety's liability. Analysis: The judgment pertains to an appeal involving the interpretation of a security bond executed by the defendants in favor of the Government regarding storage of non-duty paid tobacco. The second defendant held a license for a bonded warehouse, and both defendants executed a bond for Rs. 5,000. The dispute arose when the Excise Department suffered a loss due to non-payment of duty on tobacco in 1946. The first defendant, a surety, claimed non-liability beyond the license period of 1943-44, while the department sought to hold him liable based on a continuing guarantee interpretation of the bond. The security bond outlined the defendants' obligations to observe Excise Duty Rules, pay dues promptly, and maintain the warehouse as per regulations. The first defendant argued that his liability was limited to the license period mentioned in the bond, citing the absence of specific duration restrictions. The court analyzed relevant rules, including Rule 155, which allows for the continuation of a bond's validity even after goods are moved to another warehouse without requiring a fresh bond. However, the court clarified that this rule does not extend the surety's liability beyond the license period. The court emphasized Rule 178, stating that licenses expire after one year and are specific to premises. The first defendant's liability could not be extended without clear provisions in the bond or rules. Despite the government's argument that the first defendant's awareness of the situation implied liability, the court found no legal basis to hold him accountable beyond the license period. The judgment concluded that the first defendant was not liable for the dues related to tobacco stored after the license period, and the appeal was allowed in his favor, resulting in the dismissal of the suit against him. Each party was directed to bear their respective costs incurred in the lower court.
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