Clandestine removal requires evidence beyond non-accountal, while failure to keep private stock records can still attract a limited penalty.

Mere non-entry of unaccounted motor vehicle parts in RG-1 did not, by itself, prove intent to clandestinely remove goods; confiscation and penalty under Rule 173Q were therefore unsustainable on the facts stated. The goods were found in the store room, were pending quality control approval, and there was no evidence of prior unauthorised removals or a pattern of evasion. However, failure to maintain even a private record of goods stored in the factory was treated as a separate procedural breach, attracting a limited penalty under Rule 226. The confiscation and principal penalty were cancelled, while the lesser penalty was sustained.

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Issues: (i) whether confiscation of the unaccounted motor vehicle parts and penalty under Rule 173Q of the Central Excise Rules were sustainable in the absence of evidence of intent to clandestinely remove the goods; (ii) whether a penalty was still leviable under Rule 226 of the Central Excise Rules for failure to maintain a private record of the goods stored in the factory.

Issue (i): Whether confiscation of the unaccounted motor vehicle parts and penalty under Rule 173Q of the Central Excise Rules were sustainable in the absence of evidence of intent to clandestinely remove the goods.

Analysis: The goods were found in the store room and were not entered in RG-1 because they had not been approved for sale and quality control tests were pending. The record did not show any prior instance of removal without documents or any pattern of violation by the assessee. On these facts, mere non-accountal in the statutory register did not establish an intention to remove the goods clandestinely.

Conclusion: Confiscation and penalty under Rule 173Q of the Central Excise Rules were not sustainable and were set aside in favour of the assessee.

Issue (ii): Whether a penalty was still leviable under Rule 226 of the Central Excise Rules for failure to maintain a private record of the goods stored in the factory.

Analysis: Although Rule 173Q was found inapplicable, the assessee had not maintained even a private record of the goods lying in the store room. That omission constituted a separate violation attracting the limited penal consequence contemplated by Rule 226.

Conclusion: A penalty of Rs. 2,000 under Rule 226 of the Central Excise Rules was upheld against the assessee.

Final Conclusion: The impugned order was modified by cancelling the confiscation and principal penalty while sustaining only the limited penalty for failure to keep a private record.

Ratio Decidendi: Mere shortage or non-entry of goods in statutory records, without evidence of clandestine removal or intent to evade duty, does not justify confiscation and penalty under the stringent excise confiscation provision, though a separate procedural lapse may still attract a lesser penalty under a specific record-keeping rule.

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