Composite supply evidence defeated a separate excise demand, while confiscation and reduced penalty were largely sustained.

Documentary evidence and purchase-order correspondence were treated as decisive in showing that the invoiced value and delivery-challan entries reflected a composite supply of containers with lids, so a separate excise demand for alleged undeclared lid clearances was not sustained. The remaining duty demands relating to replacement clearances and unaccounted scrap were maintained. Confiscation of unaccounted goods was upheld despite omission to specify the exact sub-clause of Rule 173Q, but the redemption fine and penalty were reduced in line with the deletion of the principal demand; interest on the upheld liability remained payable.

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Issues: (i) Whether the duty demand of Rs. 12,48,509/- on the alleged separate clearance of lids and bottoms, not mentioned in the central excise invoices but reflected in the delivery challans, was sustainable; (ii) whether the remaining duty demands relating to replacement clearances and unaccounted scrap were liable to be upheld; and (iii) whether confiscation of unaccounted goods, redemption fine and penalty were sustainable.

Issue (i): Whether the duty demand of Rs. 12,48,509/- on the alleged separate clearance of lids and bottoms, not mentioned in the central excise invoices but reflected in the delivery challans, was sustainable.

Analysis: The invoice and delivery challan entries were found to tally in substance, with the number of lids corresponding to the number of containers cleared. The price in the excise invoice matched the purchase order, and no evidence showed any additional consideration having been recovered for lids separately. The surrounding material supported the assessee's explanation of the packing practice, and the alleged stray invoices did not displace that conclusion.

Conclusion: The demand of Rs. 12,48,509/- was not sustainable and was set aside in favour of the assessee.

Issue (ii): Whether the remaining duty demands relating to replacement clearances and unaccounted scrap were liable to be upheld.

Analysis: These demands were not seriously contested by the assessee, and the record disclosed no basis to disturb the findings made below on these items.

Conclusion: The remaining duty demands were upheld against the assessee.

Issue (iii): Whether confiscation of unaccounted goods, redemption fine and penalty were sustainable.

Analysis: The omission to specify the sub-clause of Rule 173Q was not treated as fatal where the substance of the allegation was clear. Confiscation and fine were therefore sustained, but the redemption fine was considered excessive and reduced. Since the principal duty demand was deleted, the penalty under Section 11AC was correspondingly reduced, while interest on the upheld liability remained payable.

Conclusion: Confiscation was upheld, the redemption fine was reduced, and the penalty and interest were modified accordingly.

Final Conclusion: The appeal succeeded only to the extent of deleting the principal duty demand of Rs. 12,48,509/- and reducing the consequential penalty and redemption fine, while the other duty demands, confiscation and interest were maintained.

Ratio Decidendi: Where documentary evidence and purchase-order correspondence establish that the invoiced value and the quantity cleared correspond to the same composite supply, a separate duty demand for alleged undeclared additional goods cannot be sustained; procedural omission in citing the exact sub-clause of the confiscation provision is not fatal when the charge is otherwise clear.

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