Confiscation of unaccounted finished goods upheld, but raw materials and semi-finished goods were protected absent proof of clandestine removal.

Unaccounted finished goods may be confiscated on proof of admitted non-accountal, even without separate evidence of clandestine removal, and the redemption fine and penalties may be reduced where circumstances justify relief. By contrast, raw materials and semi-finished goods cannot be confiscated merely for non-accountal when no clandestine removal is shown and no specific confiscatory basis is established. The penalty on the authorised signatory was also set aside in relation to the raw materials and semi-finished goods, while confiscation of the finished goods was sustained.

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Issues: (i) Whether raw materials and semi-finished goods found unaccounted were liable to confiscation and consequential penalty. (ii) Whether finished goods found unaccounted were liable to confiscation and whether the redemption fine and penalties required modification.

Issue (i): Whether raw materials and semi-finished goods found unaccounted were liable to confiscation and consequential penalty.

Analysis: Confiscation under Rule 25(i)(d) of the Central Excise Rules, 2002 was invoked on the basis of non-accountal of goods. However, there was no evidence or allegation of clandestine removal of the raw materials or semi-finished goods. The legal position applied by the Tribunal was that raw materials are not manufactured goods and the same principle extended to semi-finished goods, for which no specific confiscatory provision was shown. In these circumstances, confiscation of such goods could not be sustained.

Conclusion: The confiscation of raw materials and semi-finished goods was not sustainable and was set aside, along with the penalty imposed on the authorized signatory.

Issue (ii): Whether finished goods found unaccounted were liable to confiscation and whether the redemption fine and penalties required modification.

Analysis: The finished goods were admittedly not entered in the statutory records, and the Managing Director had ed that the return was not filed deliberately because the company was not in a position to pay duty. Although clandestine removal was not independently proved, the admitted non-accountal justified confiscation of the finished goods. At the same time, the circumstances warranted reduction of the redemption fine and penalties to meet the ends of justice.

Conclusion: The confiscation of finished goods was upheld, but the redemption fine and penalties on the company and the Managing Director were reduced.

Final Conclusion: The decision upheld confiscation only in respect of the finished goods, while granting relief on raw materials, semi-finished goods, the authorized signatory's penalty, and by substantially reducing the monetary consequences for the company and the Managing Director.

Ratio Decidendi: Unaccounted finished goods may be confiscated on proof of non-accountal even without direct evidence of clandestine removal, but raw materials and semi-finished goods cannot be confiscated in the absence of a specific legal basis and supporting evidence.

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