Bona fide belief and absence of mala fides defeated confiscation and penalties over paper roll cutting activity.

Cutting and slitting jumbo paper rolls was later treated as manufacture, but the relevant seizure and confiscation occurred in July 2014 when the earlier Supreme Court view supporting the assessee's bona fide belief was still in force. That absence of mala fides was material to the penalty and confiscation question. Although the goods were liable to duty on clearance, the surrounding facts did not justify confiscation or penal action against the unit or its director. Confiscation and penalties were therefore held unsustainable and were set aside.

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Issues: Whether confiscation of the seized goods and imposition of penalties were justified when the activity of cutting and slitting jumbo paper rolls had earlier been viewed by the Supreme Court as not amounting to manufacture and the seizure was made before the later contrary view.

Analysis: The manufacture issue stood settled against the assessee in the later proceedings, but the relevant seizure and confiscation arose in July 2014, when the earlier Supreme Court decision supporting the assessee's bona fide belief was still operating. In those circumstances, the absence of mala fides was material. While the goods were liable to duty on clearance, the facts did not justify confiscation or penal action against the unit or its director.

Conclusion: Confiscation and penalties were not sustainable and were set aside in favour of the assessee.

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