Excisable goods stored outside licensed premises may attract confiscation, but penalties must remain proportionate and personal liability requires direct involvement.
Excisable goods removed and stored outside the licensed premises without prior permission were treated as having been taken in contravention of the removal and accounting rules, so confiscation was sustained, while the redemption fine and related penalty were reduced to proportionate amounts. Penalty under section 11AC could not stand without prior duty confirmation under section 11A, though other confiscation-based penalties could still apply where the breach was proved. Personal penalty under rule 209A required direct involvement in the goods or the contravention, so the director was relieved of penalty, while the general manager's penalty was retained but reduced.
Issues: (i) whether removal and storage of excisable goods outside the licensed premises without prior approval justified confiscation and redemption fine, and whether the redemption fine and penalty were excessive; (ii) whether penalty under section 11AC could be sustained in the absence of a prior duty confirmation under section 11A; and (iii) whether the director and the general manager were liable to personal penalty under rule 209A.
Issue (i): whether removal and storage of excisable goods outside the licensed premises without prior approval justified confiscation and redemption fine, and whether the redemption fine and penalty were excessive.
Analysis: Manufactured excisable goods are liable to duty upon manufacture, though payment is deferred till clearance. The rules contemplated storage pending clearance only in the licensed premises, and exceptional storage outside the premises required prior permission from the competent excise authority under the applicable rule and the board's delegated instructions. Since the assessee did not obtain such permission before shifting goods to adjoining premises, the removal attracted contravention of the removal and accounting rules. Confiscation of the goods therefore survived, but the fine and related penalty had to be proportionate to the circumstances, especially where the goods were meant for manufacture and the conduct did not show a deliberate attempt to evade duty.
Conclusion: Confiscation of the seized goods, other than the truck goods, was upheld, but the redemption fine and penalty were reduced.
Issue (ii): whether penalty under section 11AC could be sustained in the absence of a prior duty confirmation under section 11A.
Analysis: Penalty under section 11AC was treated as dependent on confirmation of duty under section 11A. As no duty had been confirmed under section 11A in the order under challenge, the statutory basis for invoking section 11AC was lacking. The penalty could, however, still be sustained under the confiscation and penalty provisions of the Central Excise Rules to the extent independently attracted by the proven contravention.
Conclusion: Penalty under section 11AC was set aside.
Issue (iii): whether the director and the general manager were liable to personal penalty under rule 209A.
Analysis: Personal penalty on a director was not justified where he did not deal with the goods and had instructed compliance with the prescribed procedure. The general manager, however, was directly involved in the decision to move the goods first and seek permission later, and his conduct attracted penal liability. Even so, the quantum of penalty had to be commensurate with the gravity of the breach.
Conclusion: Penalty on the director was set aside, while penalty on the general manager was sustained but reduced.
Final Conclusion: The appeal succeeded in part: confiscation was sustained for the main seized goods, confiscation of the truck goods was set aside, the section 11AC penalty failed, the director escaped personal penalty, and the remaining penalties and fine were reduced to proportionate amounts.
Ratio Decidendi: Where excisable goods are removed or stored outside the licensed premises without prior permission, confiscation may be sustained, but penalties must remain proportionate, section 11AC cannot be invoked without duty confirmation under section 11A, and personal penalty requires direct involvement with the goods or contravention.