Valid duty-paying documents protect a buyer from confiscation and penalty where only the manufacturer's classification is in dispute.

A trader receiving goods under valid duty-paying gate passes is not exposed to confiscation, redemption fine, or penalty merely because the manufacturer and department dispute tariff classification. The operative point is that responsibility for correct classification remains with the manufacturer, and that burden cannot be shifted to the buyer where the goods are supported by proper Central Excise documents. In the absence of evidence that the trader connived in duty evasion or committed an independent contravention, confiscation and consequential penalties are not sustainable.

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Issues: Whether goods received by a trader under valid duty-paying documents are liable to confiscation and penalty merely because of a classification dispute between the manufacturer and the department.

Analysis: The goods were received by the trader under gate passes showing duty payment. The dispute regarding the correct tariff classification arose at the manufacturer's end and there was no evidence that the trader connived in any duty evasion. Liability for correct classification cannot be shifted to the recipient of the goods when the goods are supported by valid Central Excise documents, and the recipient is not required to re-open the manufacturer's classification dispute at his end. On that basis, confiscation and the consequential redemption fine and penalty were not sustainable.

Conclusion: The goods were not liable to confiscation, and the redemption fine and penalty were set aside in favour of the assessee.

Ratio Decidendi: A recipient who purchases goods under valid duty-paying documents cannot be subjected to confiscation or penalty solely on account of the manufacturer's classification dispute, absent evidence of connivance or independent contravention by the recipient.

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