Non-entry in RG 1 register may justify confiscation, but not harsher penalty without proof of intent to evade duty.

Mere non-entry of manufactured goods in the RG 1 register, without proof of intent to evade duty or removal of the goods from the factory, does not attract the stricter penal provision under Rule 173Q of the Central Excise Rules, 1944. The omission may still amount to a procedural contravention justifying confiscation and a limited penalty under Rule 226. On the facts found, the goods were liable to confiscation, but only the lesser penalty under Rule 226 was sustainable; the harsher penalty under Rule 173Q was not.

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Issues: (i) whether non-entry of manufactured goods in the RG 1 register, on the facts found, rendered them liable to confiscation under the Central Excise Rules, 1944; and (ii) whether penalty under Rule 173Q of the Central Excise Rules, 1944 could be sustained, or the case was confined to the lesser consequence under Rule 226 of the Central Excise Rules, 1944.

Issue (i): Whether non-entry of manufactured goods in the RG 1 register rendered them liable to confiscation.

Analysis: The goods were found in the factory without entry in the RG 1 register. The explanation that they had been manufactured only on the previous day was not accepted on the facts, and the contemporaneous statement indicated earlier manufacture. Even so, the goods had not been removed from the factory and there was no material to show a deliberate omission to facilitate clearance without payment of duty. The omission therefore amounted to a contravention attracting confiscatory consequence under the procedural rule, but not to a proven deliberate evasion.

Conclusion: The goods were liable to confiscation under Rule 226 of the Central Excise Rules, 1944.

Issue (ii): Whether penalty under Rule 173Q of the Central Excise Rules, 1944 could be sustained, or the matter was confined to Rule 226.

Analysis: Since the goods had not been removed from the factory and there was no evidence of intent to evade duty, the stricter penal provision requiring deliberate conduct was not attracted. The contravention was treated as deserving leniency, and the penalty had to remain within the limit prescribed by the applicable procedural rule. The quantum imposed below was therefore reduced.

Conclusion: Penalty under Rule 173Q of the Central Excise Rules, 1944 was not sustainable; only a reduced penalty under Rule 226 of the Central Excise Rules, 1944 was upheld.

Final Conclusion: The department succeeded only to the extent of restoring confiscatory liability and a limited penalty, while the harsher penalty provision was held inapplicable on the facts.

Ratio Decidendi: Mere non-entry of manufactured goods in statutory stock records, without proof of intent to evade duty or removal from the factory, does not attract the stricter penal provision, though it may still justify confiscation and a limited penalty under the procedural rule.

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