Job-work goods under control: no clandestine removal, confiscation or equal penalty; bona fide cutter escapes Rule 209A penalty.

Goods moved under a challan for job work and remained under the manufacturer's control were not shown to have been clandestinely cleared merely because a fresh challan was not issued in the cutter's name. On those facts, confiscation and equal penalty were not justified, though duty remained payable at the stage of lawful clearance after processing and a reduced penalty could be imposed for the procedural lapse. A bona fide cutter who received the goods for edge-cutting, disclosed the position promptly, and had no culpable intent was not liable to penalty under Rule 209A of the Central Excise Rules, 1944.

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Issues: (i) Whether the confirmation of duty, confiscation of goods and equal penalty on the appellants could be sustained when the goods were cleared under a challan for job work and remained under their control; (ii) Whether penalty was leviable on the cutter under Rule 209A.

Issue (i): Whether the confirmation of duty, confiscation of goods and equal penalty on the appellants could be sustained when the goods were cleared under a challan for job work and remained under their control.

Analysis: The goods were first removed from the factory under Rule 57F(3) of the Central Excise Rules, 1944 for job work. Their subsequent movement to the cutter for removal of defects was treated as a continuation of that process, and the goods were found to remain under the appellants' control. The only lapse noticed was non-issuance of a fresh challan in the cutter's name. On those facts, the goods could not be treated as having been cleared clandestinely without payment of duty, and confiscation and equal penalty could not be justified. At the same time, the appellants remained liable to duty on the goods at the stage of lawful clearance after processing.

Conclusion: The confirmation of duty, confiscation and equal penalty on the appellants was not sustainable, but a penalty for the procedural lapse was upheld and imposed under Rule 173Q of the Central Excise Rules, 1944.

Issue (ii): Whether penalty was leviable on the cutter under Rule 209A.

Analysis: The cutter received the goods for edge-cutting and disclosed the true position at the earliest opportunity. No motive or culpable involvement in any evasion was attributable to him, and his conduct was found to be bona fide. In those circumstances, the conditions for invoking Rule 209A were not met.

Conclusion: The penalty on the cutter was not sustainable and was set aside.

Final Conclusion: The impugned order was modified so that the duty and confiscation findings against the appellants were set aside, the penalty on the cutter was deleted, and only a reduced penalty on the appellants for the procedural lapse was retained.

Ratio Decidendi: Where goods remain under the control of the manufacturer and the lapse is confined to non-issuance of a proper challan, clandestine removal and confiscation are not established; penalty may survive only for the procedural breach, and a transferee acting bona fide without culpable intent is not liable under Rule 209A.

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