Verification of returned excisable goods is required before duty demand; sealed drums alone did not justify liability or penalty.

Duty could not be demanded on goods returned to the factory under bond where the assessee stated that the goods remained intact in sealed drums and the department failed to verify them despite intimation. Rule 173M of the Central Excise Rules, 1944 required verification of the goods, not the container, and the absence of evidence of diversion or clandestine removal meant the alleged failure to open the seal did not, by itself, establish duty liability. On that basis, the duty demand was held unsustainable and penalty was not attracted.

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Issues: Whether duty could be demanded on goods returned to the factory under bond where the goods were stated to remain intact in drums and the department did not verify them, and whether penalty was sustainable.

Analysis: Rule 173M of the Central Excise Rules, 1944 required verification of the particulars of the goods and not of the container. Where the assessee asserted that the goods remained intact in sealed drums and the departmental officers did not come to verify them despite intimation, the demand could not be upheld in the absence of evidence of diversion of the goods elsewhere. The alleged lapse in opening the seal was not, by itself, sufficient to fasten duty liability when the goods were otherwise available for verification and no clandestine removal was shown.

Conclusion: The demand of duty was unsustainable and the penalty was not attracted. The appeal was allowed and the impugned order was set aside.

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