Deleted confiscation provision and limited remand scope bar penalties on directors, while clandestine removal duty demand was upheld.

Confiscation of land, plant and machinery under Rule 173Q(2) of the Central Excise Rules could not be sustained because the enabling provision had already been deleted before adjudication, so the confiscation was set aside. Penalties on the directors were also unsustainable because the Revenue had not filed any appeal against the original relief granted in their favour, and remand could not enlarge the scope of challenge. The duty demand for clandestine removal against the manufacturing units was upheld, together with consequential penalty, subject to the option of reduced penalty if duty, interest, and the prescribed portion of penalty were paid within the permitted period.

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Issues: (i) Whether confiscation of land, plant and machinery could be sustained when the enabling provision had been deleted from the statute book before adjudication; (ii) Whether penalties could be imposed on the directors in remand proceedings when the Revenue had not challenged the order in their respect; (iii) Whether the duty demand and consequential penalty on the manufacturing units arising from clandestine removal were liable to be upheld, with the benefit of reduced penalty on timely payment.

Issue (i): Whether confiscation of land, plant and machinery could be sustained when the enabling provision had been deleted from the statute book before adjudication.

Analysis: The confiscation was traced to Rule 173Q(2) of the Central Excise Rules, 1944. The provision authorising confiscation of plant and machinery had already been deleted by Notification No. 30/2000-C.E. (N.T.) with effect from 12.05.2000. Since the adjudication took place after the deletion, the authority lacked power to direct confiscation of land, plant and machinery.

Conclusion: The confiscation of land, plant and machinery was not sustainable and was set aside in favour of the appellant.

Issue (ii): Whether penalties could be imposed on the directors in remand proceedings when the Revenue had not challenged the order in their respect.

Analysis: The original order dropping proceedings was appealed by the Revenue only against the manufacturing units. No separate appeal was filed against the directors. In such circumstances, the scope of remand could not be expanded to impose penalties on persons against whom the Revenue had not challenged the original relief. The remand authority therefore acted beyond the permissible scope in imposing penalties on the directors.

Conclusion: The penalties imposed on the directors were unsustainable and were set aside in favour of the appellant.

Issue (iii): Whether the duty demand and consequential penalty on the manufacturing units arising from clandestine removal were liable to be upheld, with the benefit of reduced penalty on timely payment.

Analysis: The assessees did not contest the demand based on clandestine removal. The duty demand and penalty were upheld in line with the governing law on mandatory penalty. At the same time, an option was extended to deposit the duty, interest, and 25% of the penalty within the stipulated period, in which event the penalty would stand reduced accordingly.

Conclusion: The duty demand and penalty on the manufacturing units were upheld against the appellant, with the benefit of reduced penalty on compliance within the permitted period.

Final Conclusion: The appeals succeeded only to the extent of deletion of confiscation and setting aside of penalties on the directors, while the duty demand and penalty on the manufacturing units were sustained with a limited option for reduced penalty.

Ratio Decidendi: A confiscatory or penal measure cannot be sustained when the enabling provision has been deleted before adjudication, and remand proceedings cannot enlarge the scope of challenge to impose penalties on persons against whom no appeal was filed.

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