Unaccounted finished goods attract confiscation and penalty, but identifiable duty-paid raw materials cannot be confiscated without contrary evidence.

Unaccounted finished goods found in the factory premises were liable to confiscation and penalty under Rule 173Q(1)(b) because their excess and non-accountal brought them within the rule's mischief, so the confiscation and related penalty were sustained. Identifiable duty-paid raw materials were not liable to confiscation where invoices showed duty-paid procurement, the Revenue produced no contrary evidence, and there was no basis such as Modvat credit to treat them as offending goods, so the confiscation and connected penalty were set aside. The partner's personal penalty was also set aside because there was no showing of day-to-day accounting involvement or intent to remove goods clandestinely.

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Issues: (i) whether confiscation and penalty in respect of unaccounted finished goods found in the factory premises were sustainable under Rule 173Q(1)(b) of the Central Excise Rules, 1944; (ii) whether confiscation and penalty in respect of identifiable duty-paid raw materials were sustainable; (iii) whether the personal penalty on the partner was justified.

Issue (i): whether confiscation and penalty in respect of unaccounted finished goods found in the factory premises were sustainable under Rule 173Q(1)(b) of the Central Excise Rules, 1944.

Analysis: The finished goods were found excess and unaccounted in the factory premises. Such non-accountal brought the goods within the mischief of Rule 173Q(1)(b). The record supported confiscation and the imposition of penalty on the basis that unaccounted finished goods were liable to statutory consequences, even though the appellate authority had not given detailed reasons.

Conclusion: Confiscation and penalty in respect of the finished goods were upheld and remained against the appellant.

Issue (ii): whether confiscation and penalty in respect of identifiable duty-paid raw materials were sustainable.

Analysis: The seized raw material was shown to be ship-breaking scrap, supported by invoices indicating duty-paid procurement. No contrary evidence was produced by the Revenue, and there was no material to show availment of Modvat credit or other basis to treat the raw material as liable for confiscation. In these circumstances, mere non-accountal did not justify confiscation.

Conclusion: Confiscation of the raw materials and the connected penalty were set aside in favour of the appellant.

Issue (iii): whether the personal penalty on the partner was justified.

Analysis: The partner was not shown to be involved in the day-to-day accounting of the finished goods, and the finding of no intention to remove the goods clandestinely undermined the basis for a personal penalty.

Conclusion: The personal penalty on the partner was set aside in favour of the appellant.

Final Conclusion: The decision sustained confiscation and a limited penalty only in relation to the unaccounted finished goods, while granting relief on the raw materials and the partner's personal penalty.

Ratio Decidendi: Unaccounted finished goods found in the factory are liable to confiscation and penalty under Rule 173Q(1)(b) of the Central Excise Rules, 1944, but identifiable duty-paid raw materials are not liable for confiscation in the absence of contrary evidence.

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