Mens rea and notional stock difference barred confiscation and penalty where excess goods were satisfactorily explained.

Confiscation of alleged excess stock and penalty were held unsustainable where the stock difference was plausibly explained as notional, arising from the assessee's weighing method and accepted tolerance in weight standards. The record disclosed no evidence or allegation of intent to evade duty, so the absence of mens rea was decisive. On those facts, the excess goods could not be treated as real unaccounted stock, and neither confiscation nor penalty could be justified. The earlier view that improper maintenance of records may attract penalty did not alter the result on this factual matrix.

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Issues: Whether confiscation of excess goods and imposition of penalty were sustainable when the assessee gave a plausible explanation for the stock difference and no intention to evade duty was shown.

Analysis: The excess quantity found in the factory was explained as a notional difference arising from the assessee's method of weighing spring leaves, supported by the accepted tolerance in weight standards. The appellate finding recorded no evidence or even allegation that the unaccounted goods were kept with intent to evade duty. In the absence of mens rea, and where the excess was treated as not real but only notional, there was no justification to sustain confiscation or penalty. The earlier view that penalty could be imposed for improper maintenance of records did not alter the result on these facts.

Conclusion: Confiscation and penalty were not sustainable and were set aside.

Final Conclusion: The assessee succeeded, and the impugned order was annulled with consequential relief.

Ratio Decidendi: Where no intention to evade duty is found and the alleged excess stock is satisfactorily explained as notional or within permissible tolerance, confiscation and penalty cannot be upheld.

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