Rule 25 confiscation requires a specific alleged contravention; vague notice and open-market goods could not sustain penalty.

Goods purchased from the open market and found in a 100% EOU factory were not liable to confiscation under Rule 25 of the Central Excise Rules, 2002 where the show cause notice did not specify the exact contravened clause and the alleged accounting obligation was not shown to apply to such goods. Rule 25 operates only where the relevant contravention is clearly alleged and established; vague notice language was insufficient. As the goods themselves were not liable to confiscation, the penalty could not survive. The confiscation and penalties were therefore not sustainable, and the Revenue appeals were dismissed.

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Issues: Whether goods purchased from the open market and lying in the factory premises of a 100% EOU were liable to confiscation and penalty under Rule 25 of the Central Excise Rules, 2002, and whether the confiscation could be sustained when the show cause notice did not specify the exact clause of Rule 25 allegedly contravened.

Analysis: Rule 25 applies to excisable goods produced, manufactured, or stored by a producer, manufacturer, registered warehouse holder, or registered dealer, and confiscation follows only where the relevant contravention is specifically alleged and established. The goods in question were not the CT-3 procured goods which alone were required to be accounted for in the statutory records, but goods purchased from the open market. Such goods were not shown to be subject to the accounting obligation invoked by the notice. The notice and the adjudication order also failed to identify the precise clause of Rule 25 under which confiscation was proposed, rendering the charge vague. In these circumstances, confiscation could not be upheld, and once the goods themselves were not liable to confiscation, penalty also could not survive.

Conclusion: The confiscation and penalties were not sustainable and the Revenue appeals were dismissed.

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