Confiscation of duty-paid raw material under Central Excise rules is not authorised, and related penalties fail.

Rule 25 of the Central Excise Rules, 2002 does not authorise confiscation of raw material received in a factory, because the provision is directed to finished excisable goods held by a manufacturer, warehouser or registered dealer. Where the goods are duty-paid raw material intended for consumption in the factory, confiscation and the consequent redemption fine are not sustainable. Penalties imposed on the same basis also fail, because they rest on the same impermissible confiscation. The assessee therefore succeeds on the central excise confiscation and penalty issues.

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Issues: Whether raw material received in the factory could be confiscated and whether the penalties imposed under the Central Excise law were sustainable.

Analysis: Rule 25 of the Central Excise Rules, 2002 contemplates confiscation in relation to finished excisable goods from a manufacturer, warehouser or registered dealer. The goods in question were found to be raw material for consumption in the factory and not finished excisable goods. The applicable judicial view holds that confiscation of raw material for non-accountal is not authorised under Rule 25, and once the goods are duty paid raw material, confiscation and the consequential redemption fine cannot stand. The same reasoning also defeats the penalties imposed on the same footing.

Conclusion: Confiscation of the raw material and the penalties imposed were unsustainable and were set aside in favour of the assessee.

Ratio Decidendi: Rule 25 of the Central Excise Rules, 2002 does not authorise confiscation of raw material not being finished excisable goods, and penalties founded on such impermissible confiscation cannot be sustained.

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