Captive consumption exemption for broken biscuits defeated duty, and the related penalty and confiscation measures fell away.

Broken biscuits recycled and used captively in the manufacture of fresh biscuits were treated as captive consumption, as the Director's statement, the private register for broken biscuits, and the reprocessing contract showed no removal from the factory. On those facts, the exemption for captive consumption applied and duty was not payable on the broken biscuits. As the duty demand failed, the consequential penalty, confiscation, redemption fine, and connected penalties on the Director and the company could not be sustained.

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Issues: Whether duty was payable on broken biscuits used in the manufacture of fresh biscuits and whether the penalties and confiscation ordered in consequence could survive.

Analysis: The broken biscuits were shown to have been recycled and used captively in the manufacture of fresh biscuits. The statement of the Director, the private register maintained for broken biscuits, and the contract permitting reprocessing supported the conclusion that there was no removal of the goods from the factory. On these facts, the broken biscuits were treated as captively consumed and eligible for the exemption applicable to captive consumption.

Conclusion: Duty was not payable on the broken biscuits, and the penalty, confiscation, redemption fine, and connected penalties on the Director and Parle Products Ltd. could not be sustained.

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