Unauthorised manufacturing under compounded levy scheme justifies confiscation and penalty despite statutory return entries.

Under the compounded levy scheme, unauthorised manufacturing activity after declaring factory closure justified confiscation and penalty when the furnace was found operating without intimation to the department. The unretracted statement of the security guard, the inability to produce statutory records for finished goods, and the continuing production activity supported the finding of contravention of Rule 96ZO of the Central Excise Rules, 1944. Entries in RG-1 and RT-12 returns did not assist because the dispute concerned concealed manufacturing activity, not mere book treatment. The penalty was also sustained despite objection on the cited sub-rule, as Rule 173Q(1)(b) was held applicable.

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Issues: Whether confiscation of the seized goods and imposition of penalty were justified where the assessee, working under the compounded levy scheme, had declared closure of the factory but the furnace was found in operation without intimation to the department.

Analysis: The assessee had declared that the factory was closed, yet the officers found the induction furnace operating and production activity continuing. The security guard's statement regarding operation of the furnace remained unretracted, and the other employee could not produce statutory records relating to the finished goods. The plea that the goods were reflected in RG-1 and RT-12 returns did not assist the assessee because the dispute related to unauthorised manufacturing activity under the compounded levy regime. The finding of contravention of Rule 96ZO of the Central Excise Rules, 1944, therefore supported confiscation and penalty. The objection regarding the absence of a specific sub-rule in the penalty order was also rejected in view of the applicability of Rule 173Q(1)(b) of the Central Excise Rules, 1944.

Conclusion: Confiscation of the seized goods and imposition of penalty were upheld as valid.

Ratio Decidendi: When an assessee under the compounded levy scheme carries on manufacturing activity without intimation to the department, confiscation and penalty are justified notwithstanding claimed book entries in statutory returns.

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