Duty demand on bona fide purchaser and penalty without notice set aside, while confiscation stood and redemption fine was reduced.

Duty could not be fastened on a bona fide purchaser of polyester fibre tow where the Department failed to establish any link between the purchaser and the manufacturer's duty liability; the demand was therefore set aside. Penalty was unsustainable because the show cause notice did not propose penal action against the appellants, so the penalty was deleted. The confiscation was maintained, but the redemption fine was reduced in light of the purchase from the manufacturer and the surrounding facts, granting partial relief to the assessee.

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Issues: (i) Whether duty could be demanded from the appellants on 1061 kgs. of polyester fibre tow purchased from the manufacturer, and (ii) whether the penalty and redemption fine imposed on the appellants were sustainable.

Issue (i): Whether duty could be demanded from the appellants on 1061 kgs. of polyester fibre tow purchased from the manufacturer.

Analysis: The goods were established by chemical examination to be polyester fibre tow, and confiscation was justified on that basis. However, the appellants were not manufacturers of the goods and used them only in the manufacture of shoddy wool. The Department did not establish any link showing that the appellants had a duty liability for the goods on the facts proved before the Tribunal.

Conclusion: The demand of duty on 1061 kgs. of polyester fibre tow was set aside in favour of the assessee.

Issue (ii): Whether the penalty and redemption fine imposed on the appellants were sustainable.

Analysis: The penalty was found unsustainable because the show cause notice did not propose penal action against the appellants. As regards redemption fine, the appellants had throughout asserted that the goods had been purchased from the manufacturer at a stated rate, and that circumstance warranted moderation of the fine.

Conclusion: The penalty was set aside and the redemption fine was reduced.

Final Conclusion: The order of confiscation was maintained, but the duty demand and penalty were deleted and the redemption fine was reduced, resulting in partial relief to the appellants.

Ratio Decidendi: Duty cannot be fastened on a bona fide purchaser who is not shown to be linked to the manufacturer's evasion, and a penalty is not sustainable where the show cause notice contains no proposal for penal action.

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