Valid permit under Excise Rules shields assessee from penalty and confiscation where duty payment is certified by competent authority.

Rule 40 of the Excise Rules applied penal and confiscatory consequences only where unmanufactured tobacco was received or possessed in contravention of a valid permit showing that proper duty had been paid. Where the assessee received the goods under a permit issued by a competent authority and the permit certified duty payment at the applicable rate, there was no breach attributable to the assessee. Any short-payment or erroneous departmental certification could not be fastened on the assessee. The order imposing duty, penalty, and confiscation was therefore unsustainable.

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Issues: Whether the assessee could be held liable under Rule 40 of the Excise Rules and subjected to penalty and confiscation when the goods were received under a valid permit issued by a competent authority showing payment of the proper duty.

Analysis: Rule 40 prohibited receipt or possession of unmanufactured tobacco otherwise than under a valid permit granted by an officer showing that the proper duty had been paid, and the penal and confiscatory consequences applied only in case of receipt in contravention of that rule. On the facts found, the assessee received the goods under a valid permit issued by the competent authority and the permit itself showed payment of duty at the rate applicable to the goods. Once such a permit existed, there was no contravention by the assessee, and any alleged short-payment or erroneous certification by the department could not be visited upon the assessee. Accordingly, the department could not invoke the latter part of Rule 40 against the assessee.

Conclusion: The assessee was not liable under Rule 40 of the Excise Rules, and the order imposing duty, penalty, and confiscation was unsustainable.

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