Non-entry in Modvat register alone did not justify confiscation or penalty for duty-paid goods stored in factory.

Duty-paid excisable goods brought into a factory and stored there must be accounted for, but mere non-entry in RG 23A Part-I, without actual availing of Modvat credit, does not by itself justify confiscation under Rule 173Q(1). The explanation for the non-entry was treated as sufficient, and the Tribunal accepted the view that the provision's application in such circumstances was debatable. On that basis, confiscation of the goods and the consequential penalty under Rule 209A were held not sustainable.

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Issues: Whether duty-paid excisable goods stored in the factory, but not entered in RG 23A Part-I, could be confiscated under Rule 173Q(1) and whether penalty under Rule 209A could be imposed.

Analysis: The Tribunal held that Rule 173Q(1) is debatable in its application to goods stored by an assessee, and that excisable goods brought into the factory and stored there must be accounted for. It accepted the view that mere non-entry in the Modvat register, without availing credit, did not by itself justify confiscation of the raw material. The explanation for non-entry was treated as a sufficient reason, and the reasoning adopted by the Commissioner (Appeals) was found to be correct.

Conclusion: Confiscation of the goods and the consequential penalty were not sustainable, and the Revenue's challenge failed.

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