Bona fide clearance under branded-goods exemption guidance can defeat confiscation and penalty while leaving duty liability intact.

Goods cleared under a bona fide understanding of Notification No. 175/86-C.E., supported by departmental circular guidance, were treated as attracting the brand-name restriction, but confiscation was not warranted in the circumstances. The supplier's failure to follow Chapter X procedure mitigated the penal consequences, so the redemption fine and penalty were set aside. The duty liability, however, remained unaffected and continued to subsist, with recovery still available if the goods were used and Modvat credit, where otherwise admissible, could be claimed separately.

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Issues: Whether confiscation of the goods, redemption fine and penalty were justified when the goods carrying the appellants' brand name were cleared by the supplier under Notification No. 175/86-C.E., and whether the duty liability nevertheless survived.

Analysis: The goods were treated as falling within para 7 of Notification No. 175/86-C.E. because they bore the brand name of the appellants, but the record showed that the supplier and the appellants acted under a bona fide belief supported by the Board's circular concerning similar branded containers and allied goods. In these circumstances, the failure to follow the Chapter X procedure was considered a matter that mitigated the consequences of confiscation and penalty. The duty aspect was treated separately: the liability to duty remained unaffected, and the goods could still be subjected to recovery if used, with liberty to seek Modvat credit if otherwise admissible.

Conclusion: Confiscation of the goods was not justified, and the redemption fine and penalty were set aside. The duty liability remained intact.

Ratio Decidendi: Where goods are cleared under a plausible bona fide understanding supported by departmental circular guidance, confiscation and penalty may be set aside even though the underlying duty liability continues to subsist.

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