Penal confiscation of mixed tobacco is limited to the duty-unpaid component, not the entire stock, when segregation is impossible.

Rule 40 of the Central Excise Rules, 1944 authorises confiscation only of goods on which duty has not been paid, and the provision, being penal, cannot be expanded by implication to cover an entire mixed stock containing duty-paid tobacco. Where the wrongdoer's own mixing prevents exact segregation, confiscation may nevertheless be limited to goods of value reasonably representing the non-duty-paid component, so the statutory power is not defeated. On the facts noted, the confiscation was confined to the value of the duty-unpaid tobacco and the redemption amount corresponded to that value.

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Issues: (i) Whether, on facts found, the entire mixed tobacco seized from the licensed premises was liable to confiscation under Rule 40 of the Central Excise Rules, 1944; (ii) whether the confiscation could extend beyond the quantity representing the non-duty-paid tobacco and be confined only to goods reasonably representing that quantity.

Issue (i): Whether, on facts found, the entire mixed tobacco seized from the licensed premises was liable to confiscation under Rule 40 of the Central Excise Rules, 1944.

Analysis: Rule 40 authorises confiscation of goods on which duty has not been paid. The seized stock consisted of both duty-paid and non-duty-paid tobacco mixed together by the appellants, and the provision being penal in nature could not be enlarged by implication so as to cover all the mixed goods merely because separation had become difficult. At the same time, the wrongful mixing could not be allowed to defeat the statutory power altogether.

Conclusion: The entire mixed tobacco was not liable to confiscation under Rule 40.

Issue (ii): Whether the confiscation could extend beyond the quantity representing the non-duty-paid tobacco and be confined only to goods reasonably representing that quantity.

Analysis: Where the wrongdoer's act makes precise segregation impossible, the authorities may confiscate from the mixed stock goods of value reasonably representing the non-duty-paid tobacco, so that the offender does not profit from the wrong. On the agreed valuation, the non-duty-paid component was worth Rs. 35,000, and the fine in lieu of confiscation had to correspond to that amount.

Conclusion: Confiscation was confined to the extent reasonably representing the value of the non-duty-paid tobacco, and the fine was reducible to Rs. 35,000.

Final Conclusion: The appellants succeeded only to the extent of limiting confiscation and reducing the redemption amount, with refund directed of the excess recovered over the permissible amount.

Ratio Decidendi: A penal confiscation provision authorising seizure of duty-unpaid goods cannot be stretched to cover the whole of a mixed stock containing duty-paid goods, but where the wrongdoer's act prevents segregation, confiscation may be limited to goods of value reasonably representing the non-duty-paid component.

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