Confiscation without a specified statutory basis fails; delayed return penalty stands only for the proved post-registration default.

Confiscation of excess finished goods under the Central Excise Rules, 2002 could not be sustained where the order, show cause notice, and lower findings failed to specify the statutory ground invoked; the redemption fine based on that confiscation was therefore also unsustainable and was deleted. By contrast, filing of returns remained mandatory after registration, so penalty for delayed returns could be maintained only for the default actually established after registration and not for any pre-registration period. The penalty was accordingly restricted to the proved lapse and reduced to Rs. 40,000.

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Issues: (i) Whether confiscation of the excess finished goods and the redemption fine imposed thereon were sustainable; (ii) Whether the penalty for delayed filing of returns was liable to be sustained in full.

Issue (i): Whether confiscation of the excess finished goods and the redemption fine imposed thereon were sustainable.

Analysis: The excess finished goods had already borne duty at the time of provisional release. The order of confiscation under Rule 25 of the Central Excise Rules, 2002 did not identify the specific ground for invoking confiscation, and neither the show cause notice nor the lower orders disclosed which of the statutory circumstances was attracted. In the absence of a clearly stated basis, confiscation could not be upheld and the redemption fine flowing from it was equally unsustainable.

Conclusion: The confiscation and the redemption fine were set aside in favour of the assessee.

Issue (ii): Whether the penalty for delayed filing of returns was liable to be sustained in full.

Analysis: The returns for June 2015 and October 2015 were admittedly filed belatedly after registration had been obtained. Once registration was taken, compliance with the return-filing requirements remained mandatory notwithstanding the pendency of the underlying dispute. However, no penalty could be imposed for any period prior to registration, and the penalty had to be confined to the default actually established after registration.

Conclusion: The penalty was upheld only to the extent of Rs. 40,000 and was reduced accordingly in favour of the assessee.

Final Conclusion: The impugned order was modified by deleting the confiscation and redemption fine, while restricting the penalty for delayed returns to Rs. 40,000.

Ratio Decidendi: Confiscation under the excise rules cannot be sustained unless the statutory ground for confiscation is specifically identified and established, and penalty for procedural default after registration may be sustained only to the extent of the actual proved lapse.

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