Non-accountal of finished goods in RG-1 alone does not justify harsher excise penalty absent evidence of clandestine removal.

Mere non-accountal of finished goods in the RG-1 register was treated as insufficient to attract the harsher penalty under Rule 173Q(b) of the Central Excise Rules, 1944, where the record showed no material indicating clandestine removal, no other discrepancy in the statutory records, and no prior instance of clandestine manufacture or clearance. The goods were found in excess of the RG-1 balance and seized, but that omission was held to fall within Rule 226, which governs such accounting lapses. The operative effect is that non-accountal alone does not justify the more severe penal provision in the absence of evidence of intent to evade duty.

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Issues: Whether penalty for non-accountal of finished goods in the RG-1 register was sustainable under Rule 173Q(b) of the Central Excise Rules, 1944, or whether the lapse attracted only Rule 226 of the Central Excise Rules, 1944.

Analysis: The goods were found in excess of the RG-1 balance and were seized, but the record did not show any material indicating an intention to remove them clandestinely or without payment of duty. The only lapse was non-accountal, no other discrepancy in the statutory records was found, and there was no earlier instance of clandestine manufacture or clearance. In such circumstances, mere non-accountal by itself was treated as insufficient to invoke the harsher penal provision under Rule 173Q(b), and the proper provision for such omission was Rule 226.

Conclusion: Penalty under Rule 173Q(b) was not sustainable, and the assessee was liable only to a penalty under Rule 226.

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