RG 1 non-entry of finished goods supports confiscation; duty-free clearance sustains demand, while personal penalty needs proof of knowledge.

Finished excisable cotton denim fabrics not entered in the statutory RG 1 register were liable to confiscation because daily recording of finished goods was mandatory; the authenticated loose register was only a mitigating factor, so the redemption fine was reduced. Goods cleared under seized invoices without duty attracted duty demand and penalty because the officials' statements established duty-free clearance, though the penalty was reduced after prompt duty payment. Penalty on the Vice President was unsustainable because no material showed knowledge of the offending clearance or confiscability, and his presence at the market office, not the factory, negated the basis for personal liability.

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Issues: (i) Whether fully finished cotton denim fabrics found unaccounted in the statutory RG 1 register were liable to confiscation and whether the redemption fine required reduction; (ii) whether the duty demand and penalty were sustainable in respect of goods cleared under the seized invoices without payment of duty; and (iii) whether penalty was imposable on the Vice President on the basis of his alleged knowledge of the clearance and confiscability of the goods.

Issue (i): Whether fully finished cotton denim fabrics found unaccounted in the statutory RG 1 register were liable to confiscation and whether the redemption fine required reduction.

Analysis: The fully manufactured fabrics were found outside the statutory record and the appellants did not dispute that the goods were fully finished. The requirement under the Central Excise Rules was that finished goods be entered in RG 1 on a daily basis, and failure to do so amounted to contravention attracting confiscation. At the same time, the goods had been entered in a loose register that was authenticated by the Department, which was a relevant mitigating circumstance for the quantum of redemption fine.

Conclusion: The goods were liable to confiscation, but the redemption fine was reduced from Rs. 20 lakh to Rs. 5 lakh.

Issue (ii): Whether the duty demand and penalty were sustainable in respect of goods cleared under the seized invoices without payment of duty.

Analysis: The statements of the concerned officials admitted that the goods covered by the invoices had been cleared without payment of duty, and the appellants failed to dislodge the findings recorded by the adjudicating authority. Since the clearance without duty stood established, the demand of duty and liability to penalty followed. However, the fact that the duty amount had been paid immediately justified reduction of the penalty.

Conclusion: The duty demand was upheld and the penalty on the appellants was sustained, but it was reduced to Rs. 2 lakh.

Issue (iii): Whether penalty was imposable on the Vice President on the basis of his alleged knowledge of the clearance and confiscability of the goods.

Analysis: No material was brought on record to show that the Vice President had knowledge of the goods being liable to confiscation, especially since he was shown to be stationed at the market office and not at the factory premises. In the absence of proof of knowledge, the foundation for penalty was missing.

Conclusion: The penalty on the Vice President was set aside.

Final Conclusion: The appeals resulted in sustained confiscation and duty liability, with substantial reduction in the redemption fine and penalty, and one penalty was annulled for want of proof of knowledge.

Ratio Decidendi: Finished excisable goods not entered in the statutory RG 1 register are liable to confiscation under Rule 173Q(1) of the Central Excise Rules, 1944, while penalty on an individual requires material showing knowledge or culpable connection with the offending goods.

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