Bona fide storage breach in adjacent premises justified no confiscation, only nominal penalty for technical non-compliance.

Raw material stored in an adjacent unit within the same compound was held not liable to confiscation where it had been received under bills of entry, there was no duty demand, and no mala fide intention was found; the confiscation and redemption fine were set aside. Storage outside the licensed premises was treated as a technical and procedural breach, not a contravention with intent to evade duty, so penalty under Rule 25(1)(d) was held inapplicable and only a nominal penalty under Rule 27 was warranted. Penalties on the connected appellants were set aside because no culpable role was established.

---

---

Issues: (i) Whether raw material stored in the adjacent factory premises in the same compound could be confiscated and subjected to redemption fine in the absence of any duty demand or mala fide intention; (ii) whether penalty on the main appellant was sustainable under Rule 25(1)(d), or was confined to a lesser penalty under Rule 27 for a technical and procedural breach; and (iii) whether the penalties imposed on the other connected appellants were justified.

Issue (i): Whether raw material stored in the adjacent factory premises in the same compound could be confiscated and subjected to redemption fine in the absence of any duty demand or mala fide intention.

Analysis: The raw material had been received under bills of entry and was kept in the premises of another unit located in the same compound because of space constraints. The units shared the same compound and security arrangement, and the material was of no use to the other unit. No mala fide intention was found, and no duty demand had been raised in relation to the goods. On these facts, confiscation of the raw material was held to be unjustified.

Conclusion: The confiscation and consequential redemption fine were set aside.

Issue (ii): Whether penalty on the main appellant was sustainable under Rule 25(1)(d), or was confined to a lesser penalty under Rule 27 for a technical and procedural breach.

Analysis: The storage of the raw material outside the licensed premises amounted to a technical and procedural breach, but not a contravention with intent to evade duty. Rule 25(1)(d), which contemplates penalty for contravention with intent to evade duty, was therefore inapplicable. The breach, however, remained punishable under Rule 27, warranting only a nominal penalty.

Conclusion: The penalty on the main appellant was reduced to Rs. 5,000 under Rule 27.

Issue (iii): Whether the penalties imposed on the other connected appellants were justified.

Analysis: No role was attributed to the other connected appellants in the storage of the goods or in any act warranting penal action. In the absence of any culpable conduct, the penalties imposed on them could not be sustained.

Conclusion: The penalties on the other connected appellants were set aside.

Final Conclusion: The adjudication on confiscation was reversed, the principal penalty was substantially reduced, and the connected penalties were cancelled, leaving only a nominal penalty on the main appellant.

Ratio Decidendi: Confiscation and major penalty are not justified for a bona fide, technical storage irregularity without mala fide intention or duty demand, and such contravention is punishable, if at all, only under the residual penalty provision.

---