Small-scale exemption for branded goods: duty liability stood, but confiscation and penalty were moderated for proportionality.

Under the small-scale exemption regime, continued clearances of branded goods after the 1-4-1994 amendment did not attract relief where the manufacturer used another person's brand name, so the duty demand was maintained. However, because the revenue loss had been made good before the show cause notice and Section 11AC was neither in force nor invoked, the confiscation of plant and machinery was found excessive. The confiscation was set aside and the penalty was reduced substantially, reflecting a proportionality-based moderation of the sanction while leaving the duty liability undisturbed.

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Issues: (i) Whether the assessees, who continued to clear branded goods after the amendment to Notification No. 1/93, were liable for the duty demand and consequent adverse action; (ii) Whether the confiscation of plant and machinery and the penalty imposed were justified, or required reduction.

Issue (i): Whether the assessees, who continued to clear branded goods after the amendment to Notification No. 1/93, were liable for the duty demand and consequent adverse action.

Analysis: The goods were cleared under a small-scale exemption regime which, after the amendment from 1-4-1994, no longer permitted the benefit where the manufacturer used another person's brand name. The short levy arose because the assessees continued the clearances during the relevant period, though the duty was later made good before issuance of the show cause notice.

Conclusion: The duty liability was not disturbed, but the prior payment was taken into account for granting relief on penalty.

Issue (ii): Whether the confiscation of plant and machinery and the penalty imposed were justified, or required reduction.

Analysis: Since the revenue loss had already been made good before the show cause notice and the mandatory penalty provision under Section 11AC of the Central Excise Act, 1944 was not then in existence or invoked, the confiscation was considered excessive and the penalty was viewed as requiring moderation.

Conclusion: The confiscation order was set aside and the penalty was reduced from Rs. 1,08,045/- to Rs. 20,000/-, in favour of the assessee.

Final Conclusion: The appeal succeeded only to the extent of relief from confiscation and substantial reduction of penalty, while the underlying duty-related finding remained undisturbed.

Ratio Decidendi: Where the revenue loss is voluntarily made good before notice and the stringent penal provision is not applicable or invoked, confiscation and penalty must be moderated to what is just and proportionate.

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