1994 (9) TMI 154 - AT - Central Excise

Summary

Issues:
1. Classification of woollen yarn under Tariff Item 18-B(ii)
2. Confiscation of seized goods and imposition of penalty
3. Liability of goods to confiscation under Rule 173-Q

Analysis:
1. The case involved the classification of woollen yarn found in a factory under Tariff Item 18-B(ii) based on a chemical examination that revealed the composition of the yarn, containing more than 1/6th by weight of nylon. The appellants contended that they were not the manufacturers of the yarn, disputing the duty liability on the goods.

2. The adjudicating authority held the appellants guilty of connivance with the manufacturers of the yarn, leading to the confiscation of the seized goods, imposition of duty demand, and a personal penalty. The appellants challenged this decision through an appeal, arguing against the liability for duty payment and penalty due to not being the manufacturers of the yarn.

3. The appellate tribunal considered the applicability of Rule 173-Q, which imposes liability for confiscation on goods where duty has not been paid by the manufacturer or producer. The tribunal noted that the liability attaches to goods cleared without duty payment, emphasizing the importance of establishing non-payment of duty for confiscation. The tribunal cited a previous case to support the principle that goods become tainted due to non-payment of duty at the time of removal, justifying confiscation.

4. Referring to a Supreme Court judgment in a similar context, the tribunal differentiated between the liability of manufacturers and purchasers regarding duty payment. The tribunal set aside the duty demand and penalty while upholding the confiscation of the seized goods, providing an option for redemption. The decision highlighted the distinction between duty liability of manufacturers and purchasers in excise matters, ultimately ruling in favor of confiscation while relieving the appellants of duty payment and penalty.