Duty-paid goods and unregistered premises: excise demand and confiscation fail, but reduced penalty survives for procedural breach.

Duty-paid goods cleared from unregistered sheds did not support the substantive excise demand or consequential confiscation where no undue benefit under Notification No. 32/99-CE was established. The adverse findings on demand and confiscation were therefore set aside. However, failure to register the additional premises and to intimate their existence to the Department amounted to a procedural contravention under the Central Excise Rules, 2002, so a penalty remained exigible. That penalty was sustained only to a reduced extent of Rs. 10,000 under Rule 25.

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Issues: Whether the demand, confiscation and major penalty could be sustained when the goods were duty-paid but were cleared from unregistered sheds, and whether any penalty was still exigible for non-registration and non-intimation of the additional premises.

Analysis: The duty-paid character of the goods was not in dispute, and the record did not show any clear manner in which undue benefit under Notification No. 32/99-CE dated 08.07.1999 had been obtained. On that footing, the substantive basis for the larger adverse findings did not survive. At the same time, the sheds from which the goods were manufactured had not been registered at the material time and the existence of those premises had not been communicated to the Department, amounting to contravention of the requirement of registration under Rule 9 of the Central Excise Rules, 2002. Such procedural lapse justified a penalty, though not the full amount originally imposed.

Conclusion: The demand and consequential confiscation were set aside, but penalty was sustained only to the limited extent of Rs. 10,000 under Rule 25 of the Central Excise Rules, 2002.

Ratio Decidendi: Where the duty-paid character of goods is not disputed and no undue benefit from an exemption notification is established, substantive excise demand may not stand, but failure to register additional premises and to intimate them to the Department can still attract a reduced penalty for procedural contravention.

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