Rule 25 penalty and redemption fine fail absent duty demand or proof of unaccounted seized goods.

Penalty under Rule 25 of the Central Excise Rules, 2002 and redemption fine require satisfaction of the statutory preconditions for confiscation and penal liability. Where no duty demand was raised, the seized goods were found in the factory, were not shown to be unaccounted, and there was no evidence of illicit clearance without duty, the basis for confiscation fails. In such circumstances, redemption fine and penalty cannot be sustained. The note also records that duty had been paid on cleared goods and that penalty under section 11AC had already been set aside.

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Issues: Whether penalty under Rule 25 of the Central Excise Rules, 2002 and redemption fine could be imposed on seized goods when no duty demand was raised, the goods were lying in the factory and were not unaccounted, and the assessee had already paid duty on cleared goods.

Analysis: The goods were initially exempt and duty was imposed for the first time by Notification No. 8/2001. The assessee sought clarification from the Department and paid duty on the goods cleared by it. No duty demand was raised in the show cause notice. The seized goods were not shown to have been cleared without duty or to have remained unaccounted in the records. In these circumstances, the preconditions for penalty under Rule 25 were not satisfied. Since the basis for confiscation was not made out, redemption fine and penalty could not be sustained. The penalty under Section 11AC had already been set aside.

Conclusion: Penalty under Rule 25 and redemption fine were not sustainable, and the impugned order was liable to be set aside in favour of the assessee.

Final Conclusion: The assessee succeeded on the question of levy of penalty and redemption fine, and the order was set aside with consequential relief.

Ratio Decidendi: Penalty and redemption fine cannot be imposed on seized goods unless the statutory preconditions for confiscation and penal liability are established, including a proper duty demand or clear evidence of unaccounted or illicitly cleared goods.

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