Excess stock from rainwater in open storage: confiscation sustained, redemption fine reduced, and penalty set aside for lack of intent to evade duty.

Excess molasses found in an open pit used by a sugar factory was treated as liable to confiscation even though the excess arose from rainwater accumulation and there was no evidence of clandestine removal. The redemption fine was upheld in principle but reduced as excessive. Penalty was not sustainable because Rule 173Q required material showing intent to evade duty, and neither the notice nor the evidence disclosed any allegation or proof of such intent. The outcome left confiscation intact, moderated the fine, and set aside the penalty.

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Issues: (i) whether excess molasses found in an open pit, which had accumulated due to rainwater, was liable to confiscation and redemption fine; (ii) whether penalty was sustainable in the absence of any allegation or proof of intent to remove the goods without payment of duty.

Issue (i): Whether excess molasses found in an open pit, which had accumulated due to rainwater, was liable to confiscation and redemption fine.

Analysis: Molasses storage in open pits was a permitted activity for sugar factories, and the excess quantity was found because rainwater had accumulated in the pit. The record did not show any clandestine activity or any intention to remove the goods without payment of duty. Even so, the fact remained that the stock was found in excess and was therefore liable to confiscation. In the circumstances, the redemption fine imposed was considered justified in principle but excessive in amount.

Conclusion: Confiscation was upheld, but the redemption fine was reduced to Rs. 5,000.

Issue (ii): Whether penalty was sustainable in the absence of any allegation or proof of intent to remove the goods without payment of duty.

Analysis: Penalty under Rule 173Q required more than the mere existence of excess stock; there had to be material showing an intent to evade duty or clandestinely remove the goods. The show cause notice contained no such allegation, and the evidence also did not establish any such intent. Since the excess arose from natural accumulation of rainwater, the basis for penalty was absent.

Conclusion: The penalty was not sustainable and was set aside.

Final Conclusion: The order was modified by maintaining confiscation, reducing the redemption fine, and deleting the penalty, leaving the appeal successful only to that extent.

Ratio Decidendi: Where excess stock is found due to natural accumulation and no intent to clandestinely remove goods without payment of duty is shown, penalty is not warranted, though confiscation may still be sustained and the redemption fine may be moderated.

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