Excise duty recovery from security deposit failed where seized tobacco was shown as duty-paid stock and evidence was not rebutted.

Movement of tobacco from licensed premises to an unlicensed adjacent premises without permission was treated as a contravention of Rules 32(2) and 39 of the Central Excise Rules, 1944, and the claim of ignorance of the permission requirement did not avoid liability. On the duty-recovery issue, the Court found that the seized tobacco had been shown as duty-paid stock temporarily removed during repairs, and the revenue had not disproved that position by the available evidence. Recovery of excise duty from the security deposit was therefore unsustainable, while confiscation consequences and redemption fine remained undisturbed.

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Issues: (i) Whether the petitioner contravened Rules 32(2), 39 and 40 of the Central Excise Rules, 1944 by shifting tobacco from the licensed premises to an unlicensed premises and by keeping it there without proper authority; (ii) whether excise duty could be recovered from the security deposit on the footing that the seized tobacco was not duty-paid tobacco.

Issue (i): Whether the petitioner contravened Rules 32(2), 39 and 40 of the Central Excise Rules, 1944 by shifting tobacco from the licensed premises to an unlicensed premises and by keeping it there without proper authority.

Analysis: The petitioner admitted that the tobacco was moved from the licensed premises to the adjacent premises without permission. The material on record also showed storage in a premises not declared or licensed for the purpose. The Court accepted that such conduct attracted the relevant rules, and the explanation that permission was not known to be necessary did not displace liability.

Conclusion: The contraventions under Rules 32(2) and 39 were upheld against the petitioner, and the objection based on lack of knowledge failed.

Issue (ii): Whether excise duty could be recovered from the security deposit on the footing that the seized tobacco was not duty-paid tobacco.

Analysis: The seizure related to tobacco that had already been shown to be duty-paid stock temporarily removed from the licensed premises during repairs. The Court found that the authorities had verified and accepted the fact of shifting, but had not used the available samples to disprove the petitioner's claim that the goods were duty-paid. In those circumstances, the foundation for demanding further excise duty was not established, though confiscation consequences and redemption fine were not disturbed.

Conclusion: Recovery of excise duty from the security deposit was held unsustainable and the petitioner succeeded on this issue.

Final Conclusion: The writ petition was allowed in part, the adjudication orders were quashed only to the extent of excise duty recovery, and refund of that amount was directed while the remaining findings were left undisturbed.

Ratio Decidendi: Where seized goods are shown to be duty-paid stock and the revenue fails to disprove that fact by available evidence, further excise duty cannot be recovered merely because the goods were temporarily kept in an unlicensed premises.

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