Licensed transfer requirement limits excise duty liability, while adapted confiscation provisions can still sustain seizure of offending goods.

Excise duty liability on recovered coffee seeds depended on whether the transfer occurred through a licensed transaction contemplated by the excise rules. Reading the removal, sale and transfer provisions together, the court found no evidence that the intermediary purchaser was licensed, so the respondent did not fall within the rule fastening duty on the purchaser or possessor; the duty demand therefore failed. On confiscation, the adapted customs provisions were treated as authorising confiscation of excisable goods removed in contravention of the rules, even if the goods had not changed form. The confiscation order was therefore sustained.

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Issues: (i) Whether the respondent was liable to pay excise duty on the coffee seeds recovered from his godown; (ii) whether the Department had power to confiscate the goods under the adapted customs provisions.

Issue (i): Whether the respondent was liable to pay excise duty on the coffee seeds recovered from his godown.

Analysis: The rules governing removal, sale, transfer and liability for duty were read together. Rule 24 contemplated sale of unmanufactured products only to licensed persons, Rule 19 continued the curer's liability until transfer was reported and acknowledged, and Rule 29 fastened liability on the purchaser and the person into whose possession the products passed after purchase only where the transfer was one contemplated by the Rules. On the facts, there was no evidence that the intermediary purchaser was a licensed person, so the respondent did not fall within Rule 29.

Conclusion: The respondent was not liable to pay the excise duty; that demand failed.

Issue (ii): Whether the Department had power to confiscate the goods under the adapted customs provisions.

Analysis: By the relevant notifications, provisions of the Customs Act were adapted to excisable goods removed in contravention of the Central Excise Rules. The adapted Section 120(1) was read as authorising confiscation of excisable goods so removed, notwithstanding any change in form. The Court rejected the contention that confiscation was confined only to goods that had changed form, and held that the adapted provision covered all such offending goods.

Conclusion: The goods were liable to confiscation, and the confiscation order was sustained.

Final Conclusion: The appeal succeeded only to the extent of upholding confiscation, while the demand for excise duty from the respondent was set aside.

Ratio Decidendi: Where the statutory scheme makes duty liability contingent on a licensed transfer contemplated by the excise rules, a purchaser or possessor outside that scheme is not liable for the duty; but an adapted confiscation provision may validly authorise confiscation of excisable goods removed in contravention of the rules.

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