Chapter X re-warehousing demands clear proof of substitution; unsupported mismatch allegations could not sustain duty, confiscation, or penalties.

Goods cleared under Chapter X re-warehousing procedure were alleged to have been substituted or diverted, but the department failed to establish the charge with reliable seizure records. The bags' marks and numbers matched the AR3A documents in the first seizure, and the only discrepancy was the vehicle number. For the remaining seizures, the panchanamas did not record the relevant marks and numbers, and no later record was prepared to prove a mismatch. On that evidence, the alleged diversion remained unproved, and the duty demand, confiscation and penalties were held unsustainable.

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Issues: Whether the seized cut tobacco was the same goods covered by the AR3As and invoices cleared under Chapter X procedure and, if so, whether the duty demand, confiscation and penalties could be sustained.

Analysis: The goods were cleared under Chapter X procedure for re-warehousing, and Rule 173N of the Central Excise Rules, 1944 allowed time for production of re-warehousing proof. In respect of the first seizure, the marks and numbers on the bags tallied with the AR3A documents, and the only variation was the vehicle number. For the remaining seizures, the seizure panchanamas did not record the marks and numbers found on the bags, and no subsequent panchanama was prepared to establish any mismatch. The allegation of substitution and diversion therefore remained unsupported by evidence. The explanation that the transporter used different trucks en route was not properly investigated, and the record did not establish that the goods were cleared without payment of duty.

Conclusion: The demand of duty, confiscation and penalties were not sustainable, and the assessees succeeded on this issue.

Ratio Decidendi: Where goods cleared under a prescribed excise movement procedure are alleged to be substituted or diverted, the department must prove the allegation with clear evidence, including reliable seizure records showing mismatch of marks and numbers; in the absence of such proof, duty demand and confiscation cannot stand.

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