Non-accountal in statutory records cannot justify confiscation or penalty without independent evidence of clandestine removal.

Mere non-accountal of finished goods in RG-1 does not, by itself, justify confiscation or penalty where the assessee produces credible documentary evidence explaining the stock. Here, MS ingots were shown to have been earlier cleared on duty, returned by the customer under excise invoices, and taken back under Rule 16 of the Cenvat Credit Rules, with the seized quantity forming part of returned, unutilised stock. In the absence of independent evidence of clandestine removal, the initial statement of the authorised signatory was insufficient to sustain the allegation. The confiscation and penalties were therefore not sustainable, and the appeals succeeded.

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Issues: Whether excess finished goods found not entered in RG-1 register were liable to confiscation and whether penalties could be sustained in the absence of independent evidence of clandestine removal.

Analysis: The goods involved were MS ingots falling under Chapter 72 of the Central Excise Tariff Act, 1985. The appellants produced documentary records showing that the goods had earlier been cleared on payment of duty, returned by the customer under excise invoices, and taken back in terms of Rule 16 of the Cenvat Credit Rules, 2004. The seized quantity was explained as part of the returned stock lying unutilized. Apart from the initial statement of the authorized signatory, no independent evidence supported an inference of clandestine removal. Mere non-accountal in RG-1, by itself, was held insufficient to justify confiscation or penalty where the documentary evidence displaced the allegation.

Conclusion: The confiscation and penalties were not sustainable and the issue was decided in favour of the appellants.

Final Conclusion: The appeals succeeded and the impugned order was set aside with consequential relief.

Ratio Decidendi: Mere non-accountal of goods in statutory records does not, by itself, justify confiscation or penalty unless there is independent evidence showing that the goods were meant for clandestine removal; credible documentary evidence can displace a bare admission.

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