Confiscation of unaccounted factory goods upheld, but personal penalty requires a clear nexus to the offending conduct.

Unaccounted finished goods found within the factory were treated as liable to confiscation under Rule 25 of the Central Excise Rules, 2002, and the connected redemption fine and penalty on the company were upheld because the goods were not entered in the statutory records. By contrast, the personal penalty on the director under Rule 26 was set aside because he was found to be connected with a different company and no demonstrable nexus with the appellant company's offending conduct was shown. The document states the settled principle that confiscation may follow from unaccounted goods in the factory, but personal penalty requires a clear link between the individual and the impugned activity.

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Issues: (i) Whether confiscation of unaccounted finished goods in the factory and the consequential redemption fine and penalty on the appellant company were sustainable under Rule 25 of the Central Excise Rules, 2002. (ii) Whether the personal penalty imposed on the director under Rule 26 of the Central Excise Rules, 2002 was sustainable.

Issue (i): Whether confiscation of unaccounted finished goods in the factory and the consequential redemption fine and penalty on the appellant company were sustainable under Rule 25 of the Central Excise Rules, 2002.

Analysis: The goods were found not accounted for in the statutory records and were therefore confiscated under Rule 25. Confiscation of such unaccounted finished goods within the factory was treated as consistent with the rule, and the connected redemption fine and penalty imposed on the company were held to be justified.

Conclusion: The confiscation, redemption fine, and penalty on the appellant company were upheld.

Issue (ii): Whether the personal penalty imposed on the director under Rule 26 of the Central Excise Rules, 2002 was sustainable.

Analysis: The director was found to be connected with a different company and not with the appellant company or its impugned activities. In the absence of such connection, the basis for fastening personal penalty under Rule 26 was not made out.

Conclusion: The personal penalty on the director was set aside.

Final Conclusion: The appeal succeeded only to the extent of deletion of the personal penalty, while the confiscation order and consequential monetary liabilities against the company were sustained.

Ratio Decidendi: Unaccounted finished goods found within the factory may be confiscated under Rule 25 of the Central Excise Rules, 2002, but a personal penalty under Rule 26 requires a demonstrable nexus between the individual and the offending conduct.

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