Confiscation and presumptive demand fail without evidence, but duty on unproved clearance of blankets and related penalty survive.

Confiscation of excess finished goods could not be sustained once the goods had been unconditionally released and were no longer available for confiscation, so that part of the demand failed. Duty on 497 blankets was upheld because the production slip showed movement of goods to the warehouse and the assessee failed to prove duty-paid clearance, attracting an adverse inference. A demand based on shortage of raw material was set aside because it rested only on presumption without tangible evidence of clandestine removal. Penalty survived only to the extent it related to the sustained duty demand on 497 blankets.

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Issues: (i) whether confiscation of the excess finished goods found in the factory could be sustained when the goods were released unconditionally and were not available for confiscation; (ii) whether duty demand on 497 blankets was sustainable on the basis of the production slip and absence of proof of duty-paid clearance; (iii) whether duty demand on shortage of raw material could be upheld on a presumptive basis; and (iv) whether penalty could survive in respect of the sustained duty demand.

Issue (i): whether confiscation of the excess finished goods found in the factory could be sustained when the goods were released unconditionally and were not available for confiscation.

Analysis: The goods seized during the visit had already been released without any conditional bond or security after the adjudicating authority dropped the proceedings. In the absence of goods being available on the date of the impugned order, confiscation could not be maintained. The Tribunal also applied the principle that redemption fine or confiscation cannot stand where the goods are not available and there is no continuing bond-backed custody.

Conclusion: The confiscation was set aside in favour of the assessee.

Issue (ii): whether duty demand on 497 blankets was sustainable on the basis of the production slip and absence of proof of duty-paid clearance.

Analysis: The production slip showed transfer of 1504 blankets to warehouse, and the assessee did not establish by records that 497 blankets had been cleared on payment of duty. The explanation of removal for cleaning stains remained unsupported by evidence. In these circumstances, an adverse inference was drawn and the assessee was held not to have discharged the burden of proving duty-paid clearance.

Conclusion: The duty demand on 497 blankets was upheld against the assessee.

Issue (iii): whether duty demand on shortage of raw material could be upheld on a presumptive basis.

Analysis: The notice and the confirmation of demand proceeded on an -based calculation of the finished goods said to have been manufactured from the short raw material, without tangible evidence of clandestine removal. A demand founded on assumptions and presumption, without supporting evidence, could not be sustained.

Conclusion: The demand based on shortage of raw material was set aside in favour of the assessee.

Issue (iv): whether penalty could survive in respect of the sustained duty demand.

Analysis: Penalty could not survive on the issues where confiscation and duty demand were set aside. However, since the duty demand on 497 blankets was sustained, penalty remained justified to that extent.

Conclusion: Penalty was upheld only to the extent relatable to the sustained duty demand and was otherwise not interfered with.

Final Conclusion: The appeal succeeded on confiscation and the presumptive raw-material-based demand, but failed on the duty demand relating to 497 blankets and the corresponding penalty to that extent, resulting in partial relief to the assessee.

Ratio Decidendi: Confiscation and redemption fine cannot be sustained when the goods are not available for confiscation and were not retained under a bond-backed conditional release, and a duty demand based merely on presumption without tangible evidence of clandestine removal is unsustainable.

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