Confiscation of factory scrap failed absent proof of intended removal outside the premises; penalty also fell

Confiscation of scrap found in factory premises was unsustainable because there was no factual finding that the scrap was intended to be removed outside the factory. The scrap was stated to be kept for recycling and reuse in further manufacture, so the necessary foundation for confiscation was absent; the consequential penalty also could not survive. The demand dispute on classification had already been dropped as time-barred, and the classification issue was left open.

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Issues: Whether confiscation of scrap lying in the factory premises and the consequential penalty were sustainable in the absence of a finding that the scrap was intended to be removed outside the factory.

Analysis: The demand on classification had already been dropped as time-barred, and the classification question was left open. On the scrap issue, there was no finding that the appellant intended to take the scrap of the factory premises. The scrap was stated to be kept for recycling and reuse in further manufacture. In the absence of the necessary factual foundation for confiscation, the levy of penalty also could not stand.

Conclusion: Confiscation of the scrap and the penalty were not sustainable and were set aside in favour of the assessee.

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