Defective, non-marketable goods: non-entry in RG 1 alone did not justify confiscation absent proof of duty evasion.

Seized PVC insulated tapes that were recorded in the panchanama as defective and deformed could not be confiscated merely because they were not entered in RG 1. The assessee's explanation that the reels were not marketable without salvage operations, and that such material was normally sent out for salvaging before being brought back as marketable goods, was accepted. The Department failed to prove that the goods were meant for sale or removal without payment of duty, and prolonged storage in the factory did not displace the recorded defectiveness. Confiscation was therefore unsustainable and was set aside.

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Issues: Whether confiscation of the seized PVC insulated tapes was justified merely because they were not entered in RG 1, when the assessee claimed that the goods were defective and not marketable until salvaged.

Analysis: The Panchanama recorded that the seized reels were defective and deformed. The assessee explained that such reels were not received in RG 1 because they could not be marketed without salvage operations, and that the practice was to send them out under Rule 57F(3) of the Central Excise Rules, 1944 for salvaging before bringing back the marketable material. The Department did not establish that the goods were intended for sale or removal without payment of duty. Mere prolonged storage in the factory was not sufficient to negate the defectiveness recorded in the Panchanama.

Conclusion: The confiscation was not sustainable and the assessee succeeded on this issue.

Final Conclusion: The order of confiscation was set aside and the appeal was allowed.

Ratio Decidendi: Where seized goods are shown to be defective and not marketable, non-entry in RG 1 by itself does not justify confiscation unless the Department establishes an intention to clear the goods without payment of duty.

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