Retrospective excise rule change cannot justify confiscation, but unexplained shortage of duty-paid goods remains dutiable.

Rule 56A read with Rule 173K of the Central Excise Rules, 1944 was applied on the basis that, for the relevant period, assessees needed only to intimate receipt of duty-paid goods in writing within 24 hours so that departmental verification could be made if necessary. The later 48-hour waiting requirement introduced by Notification No. 10/78 was not applicable retrospectively, so use of the goods after timely intimation did not amount to contravention and confiscation or penalty could not be sustained. However, an unexplained shortage of 1,400 capsules remained dutiable because the rule did not allow credit for lost duty-paid goods, and duty on the shortage was recoverable.

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Issues: (i) whether the assessees contravened Rule 56A read with Rule 173K of the Central Excise Rules, 1944 by taking the duty-paid goods into use without waiting for verification by the departmental officers and whether confiscation and penalty were justified; (ii) whether duty was recoverable in respect of the shortage of 1,400 capsules noticed on verification.

Issue (i): Whether the assessees contravened Rule 56A read with Rule 173K of the Central Excise Rules, 1944 by taking the duty-paid goods into use without waiting for verification by the departmental officers and whether confiscation and penalty were justified.

Analysis: On the relevant date, the governing version of Rule 56A read with Rule 173K required only intimation in writing of receipt of the goods within 24 hours so as to enable the proper officer to verify the quantity if necessary. The later amended position, requiring waiting for 48 hours after intimation, was introduced only by Notification No. 10/78 dated 25-1-1978 and was not applicable to the transaction in question. Since the assessees had intimated the department within the prescribed time, there was no breach of the applicable rule, and the consequential confiscation and penalty could not stand.

Conclusion: The alleged contravention was not made out, and confiscation and penalty were not justified.

Issue (ii): Whether duty was recoverable in respect of the shortage of 1,400 capsules noticed on verification.

Analysis: The shortage was not satisfactorily explained, and Rule 56A did not provide for credit in respect of duty-paid goods lost. The duty liability on the shortage therefore remained unaffected.

Conclusion: Duty on the shortage of 1,400 capsules was payable against the assessee.

Final Conclusion: The revision succeeded on the question of alleged contravention, confiscation, and penalty, but the duty demand relating to the shortage of goods was maintained.

Ratio Decidendi: A procedural amendment requiring waiting for verification cannot be applied retrospectively to penalise conduct governed by an earlier rule that required only timely intimation, and duty on unexplained shortage remains recoverable where no credit for loss is permitted under the applicable rule.

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