Non-accountal of finished goods alone does not justify confiscation without clandestine removal, though RG1 breach may still attract penalty.

Mere non-accountal of finished goods found in the factory did not justify confiscation or redemption fine where the notice did not allege intended clandestine removal and there was no evidence of mens rea or duty evasion; those sanctions were set aside. The admitted failure to record the goods in RG1 remained a separate accounting lapse, so penalty was still sustainable under the excise rules, but only up to the statutory maximum. The decision distinguishes confiscation based on clandestine intent from penalty for breach of statutory record-keeping.

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Issues: (i) whether confiscation of the excess finished goods and the consequential redemption fine were sustainable when the goods were found unaccounted but there was no allegation of intended clandestine removal; (ii) whether penalty could still be imposed for failure to make entries in the RG1 register.

Issue (i): whether confiscation of the excess finished goods and the consequential redemption fine were sustainable when the goods were found unaccounted but there was no allegation of intended clandestine removal.

Analysis: The excess stock was explained as a day's production not yet entered in the records. The uncontroverted position was that the show cause notice did not allege any intent to remove the goods clandestinely. In the absence of such an allegation, mere non-accountal of finished goods in the factory, without evidence of mens rea or intent to evade duty, was not enough to sustain confiscation.

Conclusion: Confiscation of the goods and the redemption fine were not sustainable and were set aside.

Issue (ii): whether penalty could still be imposed for failure to make entries in the RG1 register.

Analysis: The failure to record the finished goods in RG1 remained a violation of the accounting requirement. Even though confiscation failed for want of an allegation of clandestine removal, the admitted omission to make the necessary entry justified penalty under the relevant excise rule, though only to the extent of the statutory maximum.

Conclusion: Penalty was maintainable, but it was reduced to the statutory maximum of Rs. 2,000.

Final Conclusion: The appeal succeeded to the extent that confiscation and redemption fine were annulled, while a reduced penalty for non-entry in RG1 was sustained.

Ratio Decidendi: Mere non-accountal of goods found in the factory does not justify confiscation in the absence of an allegation or proof of clandestine removal or mens rea, but a separate accounting lapse may still attract the prescribed penalty.

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