Non-entry in RG 1 is only a technical lapse where clandestine removal and mala fide intent are not proved.

Mere non-entry of finished goods in RG 1 did not justify confiscation or penalty under the Central Excise Rules where the goods were physically found inside the factory and the record did not prove clandestine removal or mala fide intent. The department failed to produce the show-cause notice and could not substantiate any attempt to clear the goods surreptitiously. The omission was treated as a technical lapse, and physical existence of goods was held not to be the same as absence of accounting. In the absence of proof of wrongful intent, the non-accountal was insufficient to sustain penal consequences.

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Issues: Whether non-entry of finished goods in RG 1, in the absence of proof of clandestine removal or mala fide intent, justified confiscation and penalty under the Central Excise Rules.

Analysis: The goods were found within the factory premises during the round of the factory and the record did not establish that they had been removed outside the factory. The department also failed to produce the show-cause notice and could not substantiate clandestine removal or any attempt to clear the goods surreptitiously. The omission to enter the goods in RG 1 was treated by the lower authorities as a technical lapse, and the reasoning relied on the principle that physical existence of goods is not the same as absence of accounting. In the absence of evidence of mala fide conduct, the burden could not be shifted to the assessee to disprove a charge that had not been proved.

Conclusion: The non-accountal did not warrant confiscation or penalty, and the departmental appeal was rejected.

Ratio Decidendi: Mere non-entry of physically available goods in statutory records does not, by itself, amount to confiscable contravention where clandestine removal and mala fide intent are not proved.

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