Factory stock excess without evidence of illicit removal is not confiscable, but record-keeping lapses still attract excise penalty.

Goods found in excess inside the factory were not liable to confiscation where there was no evidence of intended clandestine removal or clearances without duty. Proceedings arising from the same investigation that had been settled before the Settlement Commission could not be relied on to fasten liability in a separate notice. By contrast, failure to record the correct stock and production figures in statutory excise records was treated as a breach of the recording obligation and attracted penalty under Rule 226 of the Central Excise Rules, 1944.

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Issues: (i) whether goods found in excess and not entered in RG-1, but kept in the factory premises, were liable to confiscation and whether proceedings connected with the same investigation but settled before the Settlement Commission could be used against the assessee; (ii) whether failure to record the correct production figures in the statutory records attracted penalty under the Central Excise Rules, 1944.

Issue (i): whether goods found in excess and not entered in RG-1, but kept in the factory premises, were liable to confiscation and whether proceedings connected with the same investigation but settled before the Settlement Commission could be used against the assessee.

Analysis: The goods were admittedly found inside the factory premises, but there was no supporting evidence to sustain the allegation that they were kept with an intention to clear them without payment of duty. The Tribunal also noted that the connected clandestine removal proceedings, arising from the same investigation, had been settled before the Settlement Commission. Those settled proceedings could not be relied upon to fasten liability in the present notice. The Tribunal further applied the view that goods lying in the factory premises, by themselves, did not justify confiscation in the facts of the case.

Conclusion: The goods were not liable to confiscation, and the order dropping that part of the proceedings was upheld in favour of the assessee.

Issue (ii): whether failure to record the correct production figures in the statutory records attracted penalty under the Central Excise Rules, 1944.

Analysis: The Tribunal found that the assessee had not entered the relevant stock and production details in the statutory records as required under the rules. Such omission constituted a violation of the recording obligation under the excise law, and the prescribed penalty provision was therefore attracted.

Conclusion: Penalty under Rule 226 of the Central Excise Rules, 1944 was attracted and the assessee was directed to pay Rs. 2,000.

Final Conclusion: The confiscation issue failed against the Revenue, but the statutory-record violation was upheld and penal consequences were sustained.

Ratio Decidendi: Unaccounted goods found within the factory premises are not liable to confiscation in the absence of evidence of intended illicit removal, and a settled proceeding arising from the same investigation cannot be used to establish liability in a separate notice; however, failure to maintain correct statutory records remains punishable under the excise rules.

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