Confiscation of purchased goods needs proof of buyer's knowledge that goods were non-duty-paid

Confiscation of coal purchased by a buyer cannot be sustained without evidence that the buyer knew the goods were non-duty-paid or otherwise liable to confiscation. The Tribunal noted that the department had not established whether duty was paid or unpaid by the actual producer or manufacturer, and had proceeded against the buyer without material showing such knowledge. On that basis, the confiscation, fine and penalties, including the penalty under Rule 27 of the Central Excise Rules, 2002, were held unsustainable and set aside. The discussion also noted that the service tax demand was not supported by proper examination of the records.

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Issues: Whether confiscation of coal purchased by the assessee and the consequential fine and penalty, including penalty under Rule 27 of the Central Excise Rules, 2002, were sustainable in the absence of evidence that the assessee knew the goods were non-duty-paid.

Analysis: The Tribunal noted that the department had not established payment or non-payment of duty by the actual producer or manufacturer and had proceeded against the buyer without material showing knowledge of the goods' alleged non-duty-paid character. Applying the settled principle that confiscation cannot be sustained against a buyer in such circumstances, and observing that the service tax demand was also not supported by proper examination of the records, the Tribunal found no justification for the confiscation, fine, or penalties.

Conclusion: The confiscation and consequential penalties were held unsustainable and were set aside in favour of the assessee.

Final Conclusion: The appeal succeeded and the impugned confiscation and penal consequences did not survive.

Ratio Decidendi: Confiscation and penalty cannot be sustained against a buyer of goods unless there is evidence that the buyer knew the goods were non-duty-paid or otherwise liable to confiscation.

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