Confiscation of factory goods requires proof of clandestine or spurious storage, not mere defective statutory entries.

Unaccounted finished goods and raw material lying inside the factory could not be confiscated under Rule 173Q of the Central Excise Rules, 1944 merely because statutory entries were delayed or defective. Excise duty was treated as arising on removal, and the record-keeping requirements were viewed as regulatory rather than a basis for confiscation in the absence of clandestine removal. Confiscation could be sustained only on clear proof that the goods were not genuinely manufactured or were stored with wrongful intent, which was neither pleaded nor established. The assessee's position was upheld and the departmental request for reference failed.

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Issues: Whether unaccounted finished goods and raw material lying within the factory premises could be confiscated under Rule 173Q of the Central Excise Rules, 1944 merely because the entries were not properly made.

Analysis: The manufactured goods had not been removed from the factory premises and there was no allegation of clandestine removal without payment of duty. The liability to excise duty arises on removal of goods, and the statutory records serve a regulatory purpose. A mere delay or defect in making entries does not, by itself, justify confiscation of goods remaining within the premises. Confiscation on that ground can be sustained only where there is clear evidence that the goods were not genuinely manufactured but were stored with an oblique motive, which was not pleaded or established here.

Conclusion: The goods were not liable to confiscation on the facts found, and no question of law arose for reference.

Final Conclusion: The Department's request for reference failed, and the order in favour of the assessee was left undisturbed.

Ratio Decidendi: Goods lying within the factory premises cannot be confiscated for mere non-entry or defective entry in statutory records unless there is clear proof of clandestine or spurious storage with wrongful intent; excise liability is attracted on removal.

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