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Issues:
1. Validity of the order of the Assistant Collector, Central Excise 2. Contravention of Rule 40 of the Excise Rules 3. Liability for penalty and confiscation of goods Analysis: 1. The plaintiff's suit was decreed by the lower appellate court, which held the order of the Assistant Collector, Central Excise, as illegal and inoperative. The Union of India appealed against this decision, seeking to recover the fine and duty imposed and for the return of the confiscated goods. The plaintiff received the goods in question under a valid permit issued by a competent authority, indicating that the proper duty had been paid. The plaintiff could not be held liable for contravention of Rule 40 of the Excise Rules based on the facts presented. 2. Rule 40 prohibits wholesale purchasers from receiving goods without a valid permit showing proper duty payment. Since the plaintiff had obtained the goods under a valid permit certifying the duty payment, there was no contravention of Rule 40. The argument that the duty was not properly paid was based on a presumption by the Department, which had certified the duty payment through the permit issued to the plaintiff. The lower appellate court rightly decreed the suit, as the plaintiff had acted in accordance with the permit and was not liable under Rule 40. 3. The Department's invocation of Rule 40 was deemed incorrect as the plaintiff had received the goods under a valid permit issued by a competent authority. Even if there was an error in the duty certification, the plaintiff could not be held liable if deemed innocent by the Department. The substitution of goods by the original permit holder did not affect the plaintiff's position under Rule 40. The appeal filed by the Union of India was dismissed, as no grounds were presented to justify interference with the lower court's decision. The plaintiff was not liable for penalty or confiscation of goods under Rule 40, given the circumstances of the case.
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