Non-accountal of goods can justify confiscation and redemption fine; penalty under Rule 173Q cannot be shifted to Rule 226.

Non-accountal of excess finished goods and unaccounted inputs found in factory stock verification attracted confiscation and redemption fine under Rule 173Q, as settled law treats such non-accountal as sufficient and does not require proof of mens rea. The appellate authority's interference with confiscation and redemption fine, and its conversion of the penalty from Rule 173Q to Rule 226 of the Central Excise Rules, 1944, was held unsustainable on the facts admitted by the partner. The adjudicating authority's order was restored and the Revenue's appeal succeeded.

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Issues: Whether confiscation of unaccounted goods and the corresponding redemption fine under Rule 173Q could be set aside, and whether the penalty could be converted from Rule 173Q to Rule 226 of the Central Excise Rules, 1944.

Analysis: The stock verification revealed excess finished goods and unaccounted inputs in the factory premises, and the facts were admitted by the partner. The adjudicating authority had ordered confiscation, redemption fine, and penalty. The Commissioner (Appeals) interfered with the confiscation and redemption fine and altered the penalty provision. In view of the settled position that Rule 173Q is attracted even in cases of non-accountal of goods and that mens rea is not required to be proved for such confiscation, the appellate order could not be sustained. The conversion of the penalty from Rule 173Q to Rule 226 was also held to be unsustainable.

Conclusion: The order of the Commissioner (Appeals) was set aside and the adjudicating authority's order was restored; the Revenue's appeal succeeded.

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