Confiscation of raw materials and work-in-process failed where cash book entries negated clandestine removal and rule violations were not made out.

Raw materials and work-in-process were not liable to confiscation because they had not yet become finished excisable goods. Their entry in the cash book also undermined any allegation of clandestine manufacture or removal without payment of duty. Rule 173Q was inapplicable because none of its prescribed offences was established, and Rule 226 could not sustain the action on these facts. The confiscation, redemption fine, and penalty were therefore unsustainable and were set aside in favour of the assessee.

---

---

Issues: Whether confiscation of raw materials and goods in process, with redemption fine and penalty, was sustainable when the goods were entered in the cash book and had not become finished excisable goods.

Analysis: The goods in question were only raw materials and work-in-process and had not attained the character of finished goods liable to Central Excise duty. Their entry in the cash book negatived the allegation that they had been brought and kept outside the accounts with intent to manufacture finished goods for clandestine removal without payment of duty. Rule 173Q was inapplicable because none of the offences contemplated by that rule were made out. Rule 226, though concerned with maintenance of accounts and registers, could not support the impugned action on the facts, especially when the lower authorities had not proceeded on that basis in substance.

Conclusion: The confiscation, redemption fine, and penalty were unsustainable and were set aside in favour of the assessee.

---