Unaccounted factory stock, retracted statements, and no proof of clearance could not sustain duty confirmation or confiscation.

Duty on excisable goods found within factory premises could not be confirmed merely because the stock was unaccounted, since duty becomes payable on clearance and the record did not show removal from the factory. Confiscation based only on non-entry in RG-1 and a retracted partner's statement was not sustainable, as there was no independent tangible evidence of intended clandestine removal. The penalty on the firm was confined to the admitted record-keeping lapse, while the separate penalty on the partner was set aside.

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Issues: (i) Whether duty could be confirmed on processed fabric found within the factory premises; (ii) Whether confiscation of the fabric was sustainable on the basis of non-entry in RG-1 and the partner's statement; (iii) Whether the penalties on the firm and the partner were justified.

Issue (i): Whether duty could be confirmed on processed fabric found within the factory premises.

Analysis: Duty on excisable goods becomes payable at the time of clearance. The record did not show that the goods had been cleared from the factory, either provisionally or on redemption, and the goods were still within the factory premises.

Conclusion: Duty confirmation on the seized stock was not justified.

Issue (ii): Whether confiscation of the fabric was sustainable on the basis of non-entry in RG-1 and the partner's statement.

Analysis: The case of intended clandestine removal rested mainly on the partner's statement, which had been retracted. No independent tangible evidence of preparation for removal was shown, and the authorities did not consider the retraction.

Conclusion: Confiscation of the fabric was not sustainable and was set aside.

Issue (iii): Whether the penalties on the firm and the partner were justified.

Analysis: Once confiscation was found unwarranted, the penalty based on alleged intention to clandestinely remove the goods could not survive. However, the admitted failure to make entries in RG-1 attracted penalty for non-maintenance of records, while no separate penalty was warranted on the partner.

Conclusion: The firm's penalty was reduced to the extent permissible for non-maintenance of records, and the partner's penalty was set aside.

Final Conclusion: The appeal succeeded in substantial part, with duty confirmation and confiscation set aside and the penalties modified accordingly.

Ratio Decidendi: Duty on excisable goods cannot be confirmed merely because the goods are found unaccounted within the factory unless there is clearance or credible evidence of intended clandestine removal; a retracted statement without independent corroboration is insufficient to sustain confiscation or punitive action on that basis.

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