RG-I stage for paper goods: unpacked reels not liable to confiscation or Rule 173Q penalty.

Paper reels found unpacked on the production floor were treated as not having reached the RG-I stage because the applicable trade notice stated that, for paper, RG-I is reached only after all processing is complete and the goods are packed and weighed. On that basis, non-accountal at that stage could not support an inference of clandestine removal, so confiscation was not justified. As confiscation was unsustainable, penalty under Rule 173Q also could not survive, since it was incidental to confiscation under that rule.

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Issues: Whether the seized paper reels had reached the RG-I stage so as to require accountal and attract confiscation and penalty under Rule 173Q.

Analysis: The goods were found unpacked on the production floor. The relevant trade notice clarified that, for paper, the RG-I stage is reached only when all processes are complete and the goods have been packed and weighed. The seized goods were admittedly not packed and therefore had not reached the RG-I stage. In that situation, no intent to clandestinely remove the goods without payment of duty could be inferred, and the basis for invoking penalty under Rule 173Q also failed because such penalty was incidental to confiscation under that rule.

Conclusion: The seized goods were not liable to confiscation and the penalty could not be sustained. The issue is decided in favour of the assessee.

Ratio Decidendi: Goods that have not reached the RG-I stage, as clarified by the applicable trade notice for the commodity, cannot be treated as liable to confiscation for non-accountal, and a penalty under Rule 173Q cannot survive when confiscation itself is unsustainable.

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