Duty demand and confiscation require tangible evidence, not suspicion, where plausible manufacturing wastage explains the discrepancy.

Duty liability and confiscation cannot rest on suspicion alone. The department failed to prove that 100 wrist watches seized from a bank godown were non-duty-paid goods, as the factory address on the records did not by itself establish illicit removal; the confiscation was therefore set aside and release ordered. On the alleged clandestine removals, the demand was based on presumption rather than tangible evidence, with no comparative verification of wastage in similar watch-assembly units despite a plausible explanation of manufacturing wastage; the duty demand and consequential penalty were accordingly set aside.

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Issues: (i) whether 100 wrist watches seized from the bank godown could be treated as non-duty-paid goods and confiscated, and (ii) whether duty could be demanded on the alleged clandestine removals and penalty sustained.

Issue (i): whether 100 wrist watches seized from the bank godown could be treated as non-duty-paid goods and confiscated

Analysis: The only basis for treating the watches as non-duty-paid was the address shown to the bank, which by itself did not establish that the goods had been removed without payment of duty. The burden to prove the non-duty-paid character of the goods lay on the department, and no adequate evidence was produced. Mere reliance on the factory address could not justify confiscation.

Conclusion: The confiscation of 100 watches was set aside and their release was ordered in favour of the assessee.

Issue (ii): whether duty could be demanded on the alleged clandestine removals and penalty sustained

Analysis: The demand was founded on a presumption that the unaccounted watch movements necessarily represented equivalent clandestine production and clearance. The record did not show any comparative verification of wastage in similar watch-assembly units, although wastage in such micro-parts during assembly was a plausible explanation. Duty liability could not be fastened on surmises or unwarranted assumptions.

Conclusion: The duty demand was set aside and the penalty, being consequential, was also set aside in favour of the assessee.

Final Conclusion: The appeal succeeded in full, with all adverse confiscatory, demand, and penal consequences annulled.

Ratio Decidendi: A demand of duty or confiscation cannot be sustained on mere suspicion or presumption; the department must prove non-duty-paid character or clandestine removal by tangible evidence, especially where a plausible explanation such as manufacturing wastage exists.

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