Confiscation and personal penalty fail when foundational duty-evasion allegations are withdrawn and goods are no longer liable to confiscation.

Confiscation of excisable goods under Rule 173Q requires a prior contravention of the Central Excise Rules or removal, non-accountal, or dealing with goods with intent to evade duty. Where the foundational allegations of clandestine removal and duty evasion against the manufacturer were withdrawn by corrigendum, the goods could no longer be treated as liable to confiscation on those facts. Penalty under Rule 209A also depends on the goods being liable to confiscation and the person dealing with them knowing or having reason to believe that position. As that precondition was absent, both the confiscation order and the personal penalty were unsustainable and were set aside.

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Issues: Whether confiscation of seized excisable goods and penalty under Rule 209A of the Central Excise Rules, 1944 could be sustained when the allegations against the manufacturer regarding clandestine removal and duty evasion had been withdrawn.

Analysis: Confiscation under Rule 173Q presupposes contravention of the Central Excise Rules or removal, non-accountal, or dealing with excisable goods with intent to evade duty. Once the show cause allegations against the manufacturer, which formed the foundation of the proposed duty demand and the charge of unlawful removal, were withdrawn by corrigendum, the goods could no longer be treated as goods liable to confiscation on the facts of the case. Penalty under Rule 209A is attracted only where a person acquires, possesses, transports, removes, keeps, sells, purchases or otherwise deals with excisable goods knowing or having reason to believe that they are liable to confiscation. If the goods are not liable to confiscation, the precondition for penalty under Rule 209A is absent.

Conclusion: The confiscation order and the penalty under Rule 209A were not sustainable and were set aside in favour of the assessee.

Final Conclusion: The decision nullified both the confiscation and the personal penalty, and the appeal succeeded on the ground that the statutory preconditions for those consequences were not established.

Ratio Decidendi: Where the foundational allegations of unlawful removal and duty evasion are withdrawn, excisable goods cannot be treated as liable to confiscation, and a penalty on a person dealing with such goods cannot be imposed absent knowledge or reason to believe that the goods were liable to confiscation.

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