Confiscation of excise goods requires proof of unlawful removal or manufacture; unproved seizure cannot sustain duty demand or penalties.

Cigarettes found inside a factory under physical control were not liable to confiscation because they were not shown to have been removed in violation of excise law and should have been accounted for in RG-1. Goods found at a transporter's premises, trading premises and railway station could not attract redemption fine or duty demand absent proof that they were manufactured by the assessee. Goods said to be found at a residential premises were also not established as contravening goods. On these findings, confiscation, duty demand, penalties and redemption fine were set aside.

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Issues: Whether cigarettes found within the factory premises, at the transporter's premises, at trading premises and at a residential premises were liable to confiscation and duty demand, and whether the penalties and redemption fine sustained.

Analysis: The cigarettes found inside the factory premises were not contravening goods, as they had not been removed in violation of the excise law. Such goods ought to have been accounted for in RG-1 and were not liable to confiscation. As to the goods found at the transporter's premises, trading premises and railway station, the record did not establish that they had been manufactured by the appellant, and the redemption fine could not be fastened on that basis. The goods said to have been found at the residential premises were also not shown to be contravening goods in view of the physical control regime, which made removal without payment of duty improbable. On these findings, the confiscation, duty demand and penalties could not be sustained.

Conclusion: The confiscation and consequential demands and penalties were set aside in favour of the assessees.

Final Conclusion: The impugned order was not sustainable and the appeals were allowed with consequential relief according to law.

Ratio Decidendi: Goods found within a factory under physical control, which are not shown to have been removed in violation of law, are not liable to confiscation; similarly, liability cannot be fastened for goods at other locations unless manufacture and contravention are established.

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