Excess stock and non-accountal can trigger confiscation and penalty where facts indicate intent to evade excise duty.

Rule 173Q of the Central Excise Rules, 1944 was treated as applicable where excess finished goods were found unaccounted in factory stock and inputs were short without plausible explanation. Those facts supported an inference of intent to evade duty and to clear the excess goods without payment when opportunity arose, so non-entry in the RG-1 register was not treated as a mere technical lapse. The precedent cited by the assessee was distinguished on facts. Because the duty on the short inputs had already been debited, the monetary consequences were moderated and both the redemption fine and penalty were reduced, although confiscation and penalty were upheld in principle.

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Issues: Whether Rule 173Q of the Central Excise Rules, 1944 was attracted to confiscate the excess finished goods and impose penalty for non-accountal in the statutory records, and whether the redemption fine and penalty were liable to be reduced.

Analysis: The excess finished goods were found in the factory stock without any plausible explanation, while inputs were also found short and the duty on the short inputs was immediately debited by the assessee. On these facts, the conduct supported an inference of intention to evade payment of duty and to clear the excess goods without duty when opportunity arose. The absence of accounting in the RG-1 register was therefore not a mere technical lapse, and the precedent relied upon by the assessee was distinguishable on facts. However, since the duty on the short inputs had already been debited, the monetary consequences of confiscation and penalty required moderation.

Conclusion: Rule 173Q was rightly invoked and the confiscation and penalty were upheld in principle, but the redemption fine and penalty were reduced.

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