Duty demand on unaccounted fabrics upheld, but confiscation and penalties quashed for lack of clear statutory authority.

Duty demand on processed man-made fabrics was upheld where stock shortage, interception of fabrics in transit without proper cover, and unexplained discrepancies in statutory records supported a finding of removal without accountal and without payment of duty. Confiscation of the fabrics and vehicle, and the penalties imposed, were set aside because the additional duty statute did not itself clearly authorise such consequences and Central Excise penal provisions could not be imported for that purpose. The assessee obtained partial relief, with the duty demand sustained but confiscation and penalties quashed.

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Issues: (i) Whether the duty demand on processed man-made fabrics based on shortage and alleged clandestine removal was sustainable; (ii) Whether confiscation of the fabrics and the vehicle, and the penalties imposed, could be sustained under the relevant additional duty regime and the Central Excise Rules.

Issue (i): Whether the duty demand on processed man-made fabrics based on shortage and alleged clandestine removal was sustainable.

Analysis: The duty demand was founded on physical verification showing shortage in stock, interception of fabrics in transit without proper cover, and unexplained discrepancies in the statutory records. The explanation offered for the shortages was found unsatisfactory, and the duplication objection was not established. The record supported the conclusion that the fabrics had been removed without accountal and without payment of duty.

Conclusion: The duty demand was upheld and is against the assessee.

Issue (ii): Whether confiscation of the fabrics and the vehicle, and the penalties imposed, could be sustained under the relevant additional duty regime and the Central Excise Rules.

Analysis: The governing additional duty legislation was treated as not containing an independent mandate for penalty or confiscatory action of the kind imposed, and the Central Excise penal provisions were held not to be importable for that purpose. Applying the principle that penalty requires clear statutory authority, the confiscation of the fabrics and the vehicle, and the penalties imposed, were found unsustainable.

Conclusion: The confiscation and penalties were set aside and are in favour of the assessee.

Final Conclusion: The duty demands were sustained, but the confiscation orders and penalties were quashed, resulting in partial relief to the assessee.

Ratio Decidendi: Penalty and confiscation cannot be imposed by importing Central Excise penal provisions into an additional duty statute unless that statute itself clearly and expressly authorises such consequences.

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