Proper RG1 stock entries bar confiscation and related penalties when recorded stock matches physical stock.

Goods found in the factory and duly entered in the RG1 stock register, with the recorded quantity matching physical stock, could not be confiscated under Rule 226 of the Central Excise Rules, 1944. As confiscation was not justified, the penalty on the director and excise signatory under Rule 209A could not survive. The company's penalty also failed because the stock account reflected the correct quantity and there was no basis for confiscation. The CESTAT set aside the confiscation and all penalties in favour of the assessee.

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Issues: Whether goods duly accounted for in RG1 stock register could be confiscated and whether penalties imposed on the company and its director were sustainable.

Analysis: The goods were found in the factory premises and were admittedly entered in RG1, with the recorded quantity tallying with the physical stock. On that basis, confiscation under Rule 226 of the Central Excise Rules, 1944 was not justified. Once confiscation was not upheld, the connected penalty on the director and excise signatory under Rule 209A of the Central Excise Rules, 1944 could not survive. The penalty imposed on the company also could not be sustained when the stock account reflected the correct quantity and there was no basis for confiscation.

Conclusion: The confiscation and all penalties were set aside, in favour of the assessee.

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