RG-1 entry for bulk medicinal goods applies only after filling, packing and labelling; shortage demand was unsustainable.

Bulk medicinal preparations awaiting filling, packing and labelling were not yet finished and marketable goods, so their non-entry in RG-1 could not be treated as a shortage of finished stock. The applicable excise trade notices recognised RG-1 accounting only when goods reached the finished stage, and the Drugs & Cosmetics Act required prescribed labelling before sale or distribution. On that basis, the alleged shortages were not proved as finished goods shortages; the reconciliation statement and voluntary payment on the admitted shortage further supported the assessee. The demand of duty, with consequential penalty and interest, was therefore set aside.

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Issues: Whether the goods in bulk stage, before filling, packing and labelling, could be treated as finished goods liable to entry in RG-1 and whether duty, penalty and interest were sustainable on the alleged shortages.

Analysis: The goods in question were medicinal preparations manufactured in bulk and required further filling into containers, packing and labelling before they could be marketed. Under the Drugs & Cosmetics Act, 1940, such goods could not be sold or distributed unless labelled in the prescribed manner, and the trade notices under the Central Excise regime recognised RG-1 entry only when the goods reached the finished and marketable stage. Since the disputed quantity had not yet attained that stage, its non-entry in RG-1 could not justify treating it as finished goods shortages. The reconciliation statement and voluntary duty payment on the admitted shortage also supported the assessee's case against the larger demand.

Conclusion: The demand of duty, along with the consequential penalty and interest, was not sustainable and was set aside in favour of the assessee.

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