RG-I non-entry alone does not justify confiscation or penalty absent proof of intent to evade duty.

Confiscation and penalty under Rule 173-Q of the Central Excise Rules, 1944 were not justified where goods were found inside the factory without RG-I entry but were still on hold pending quality control approval. The court treated Rule 173-Q as penal in nature and held that it applies only when the contravention is accompanied by intent to evade duty. Since the record showed no material indicating clandestine removal or evasion, and the trade notices indicated that RG-I entry arose only after inspection, testing and packing for such goods, the action against the assessee was quashed.

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Issues: Whether confiscation of goods and penalty under Rule 173-Q of the Central Excise Rules, 1944 were justified where the goods had not been entered in the RG-I register because they were kept on hold pending quality control approval and there was no material showing intention to evade duty.

Analysis: The goods were found inside the factory without RG-I entry, but the record showed that they were not yet cleared by the quality control department and were marked on hold. Trade notices relied upon indicated that, for similar goods, the RG-I stage arose only after inspection, testing, and packing. Rule 53 required stock accounting of manufactured goods, and Rule 173-Q was penal in nature and attracted only when contravention was committed with intent to evade payment of duty. The absence of any material showing an intention to remove the goods clandestinely or evade duty distinguished the case from precedents where goods were fully packed and ready for despatch.

Conclusion: Confiscation and penalty were not sustainable; the action taken against the assessee was quashed.

Ratio Decidendi: Non-accounting of goods in RG-I does not by itself justify confiscation or penalty under Rule 173-Q of the Central Excise Rules, 1944 unless the goods are shown to be finished and there is proven intent to evade duty.

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