Confiscation of duty-paid transformers not justified where recipient unit did not manufacture transformers and no specific contravention was shown.

Duty-paid transformers found in the premises of a unit that did not manufacture transformers could not be confiscated absent a specific contravention under the Central Excise Rules. The record showed that the goods were manufactured by one appellant and merely located in the premises of another appellant engaged in paper coated wire manufacture. The notice and orders did not establish any breach justifying confiscation or penalty, and the re-entry restriction on duty-paid goods was construed as applying to goods manufactured by the assessee or similar goods, not to unrelated goods received from another manufacturer. The confiscation and penalties were therefore set aside.

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Issues: Whether confiscation of transformers and penalties imposed for keeping duty-paid transformers in the premises of a unit not manufacturing transformers was sustainable under the Central Excise Rules.

Analysis: The transformers were admittedly manufactured by one appellant and found in the premises of the other appellant, which did not manufacture transformers but only paper coated wires. The notice and orders did not establish any specific contravention that would justify confiscation or penalty. The restriction on re-entry of duty-paid goods was held to apply to goods manufactured by the assessee or similar goods, and not to goods unconnected with the recipient's manufacturing activity. A trade notice was also relied upon to support this construction.

Conclusion: The confiscation and penalties were not sustainable and the appeals were allowed with consequential relief.

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