Pre-removal inspection charges form assessable value, while unrecorded manufactured goods may face confiscation and penalties under excise law.

Inspection charges incurred before removal of goods and required as a compulsory condition for supply to the buyer were includible in assessable value for central excise duty, so the duty demand based on that inclusion was sustained. Goods found to be fully manufactured but not entered in the prescribed register were liable to confiscation, and confiscation of the related waste and scrap was also upheld. Penalty under Section 11AC was maintainable, and penalty under Rule 173Q was justified on the facts, though its quantum was reduced.

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Issues: (i) Whether inspection charges incurred before removal of goods and mandatory for supply to the buyer were includible in the assessable value for central excise duty; (ii) Whether confiscation of seized goods and waste and scrap, and the penalties imposed under the central excise law, were sustainable.

Issue (i): Whether inspection charges incurred before removal of goods and mandatory for supply to the buyer were includible in the assessable value for central excise duty.

Analysis: The inspection was a compulsory pre-removal requirement for the goods supplied to the buyer. Since the inspection took place before clearance, the charges formed part of the value on which duty was to be computed.

Conclusion: The inclusion of inspection charges in the assessable value and the resulting duty demand were upheld.

Issue (ii): Whether confiscation of seized goods and waste and scrap, and the penalties imposed under the central excise law, were sustainable.

Analysis: The goods were admitted to be fully manufactured and were not entered in the prescribed register, which justified confiscation. Confiscation of the waste and scrap was also sustained. Penalty under Section 11AC was maintainable, and penalty under Rule 173Q was justified, though the quantum warranted reduction on the facts of the case.

Conclusion: The confiscation and penal consequences were upheld, but the penalty under Rule 173Q was reduced to Rs. 50,000.

Final Conclusion: The impugned order was substantially sustained, with only a reduction in the penalty under Rule 173Q.

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