Per T.K. Jayaraman :

This appeal is against the Order-in-Appeal No. 106/02-Cus. dated 15.11.2002 passed by the Commissioner of Customs Central Excise (Appeals), Bangalore.

2. The appellants are 100% E.O.U. manufacturing 'GHERKINS' for export. The processed 'GHERKINS' are packed in drums along with vinegar. The vinegar is imported duty free in terms of Customs Notification No. 53/97-Cus. dated 3.6.97. In the course of transportation from the factory to port of exportation, the processed gherkins got damaged due to accident at the Inland Container Depot at Bangalore. The lower authority demanded duty under Section 72 of the Customs Act. The Commissioner (Appeals) upheld the lower authority's order in the impugned order. The appellants strongly challenge the impugned order.

3. Smt. Komala Chowdary, learned Consultant appeared on behalf of the appellants and Shri R.V. Ramakrishnappa, learned JDR appeared for the Revenue.

4. The learned Consultant urged the following points:-

(1) There is no authority for demanding customs duty on the goods manufactured in India.

(2) The appellant has not done anything for demand of duty under Section 72 of the Customs Act. None of the situation mentioned in Section 72 has arisen in this case for demand of duty.

(3) The appellants followed all the procedures and the accident happened after the export order was given. In other words, when the order for export clearance has already been given by the proper officer, it cannot be said the goods were not properly accounted for.

5. The learned JDR reiterated the points in the Order-in-Original and in the Order-in-Appeal.

6. We have heard the rival contentions. Section 72 reads as follows :-

SECTION 72. Goods improperly removed from warehouse, etc.- (1) In any of the following cases, that is to say, -

(a) where any warehoused goods are removed from a warehouse in contravention of Section 71;

(b) where any warehoused goods have not been removed from a warehouse at the expiration of the period during which such goods are permitted under Section 61 to remain in a warehouse;

(c) where any warehoused goods have been taken under Section 64 as samples without payment of duty;

(d) where any goods in respect of which a bond has been executed under [Section 59] and which have not been cleared for home consumption or exportation are not duly accounted for to the satisfaction of the proper officer the proper office may demand, and the owner of such goods shall forthwith pay, the full amount of duty chargeable on account of such goods together with all penalties, rent, interest and other charges payable in respect of such goods

(2) if any owner fails to pay any amount demanded under sub-section (1), the proper officer may, without prejudice to any other remedy, cause to be detained and sold, after notice to the owner (any transfer of the goods notwithstanding) such sufficient portion of his goods, if any, in the warehouse, as the said officer may select."

As seen above, Section 72 applies to the goods improperly removed from warehouse. In the present case, the duty has been demanded under Section 72 (1) (d) which is applicable to the goods in respect of which a bond has been executed and which have not been cleared for home consumption or exportation are not duly accounted for to the satisfaction of the proper officer. On a careful reading of the said Section, it shows that it is applicable only to the goods which are imported and warehoused. In this case, the goods are manufactured in 100% E.O.U. out of the imported goods. Therefore, the Section itself has no direct application to the finished goods manufactured in 100% E.O.U. Hence no duty can be demanded on the impugned goods under Section 72. It is not disputed that the goods were damaged after the export order was given which is beyond the control of the appellants. It is not the case of the Revenue that the goods manufactured out of the imported goods were diverted for home consumption. In these circumstances, the demand