RG-1 register entry not required for goods still under manufacture; confiscation and penalty were unsustainable.

Goods still undergoing manufacturing processes such as washing, drying, testing, inspection and rechecking were not required to be entered in the RG-1 register because that register is only a daily production account for finished goods. The CESTAT found that the seized goods in the machine shop, production area and washing area had not reached the stage of complete manufacture, so Rule 2(a) of the Rules for Interpretation of the Schedule to the Central Excise Tariff Act did not assist the Revenue on this issue. As the goods were in process of manufacture, the foundation for confiscation and penalty was not established, and both were held unsustainable.

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Issues: Whether goods found in the course of manufacture and not yet fully manufactured were required to be entered in the RG-1 register and, if not, whether confiscation of such goods and penalty were sustainable.

Analysis: The seized goods were found in the machine shop, production area, and washing area, and the evidence showed that they were still undergoing manufacturing processes such as washing, drying, testing, inspection, and rechecking. Goods that have not reached the stage of complete manufacture are not required to be entered in the RG-1 register, which is only a daily production account. The reliance on Rule 2(a) of the Rules for Interpretation of the Schedule to the Central Excise Tariff Act did not assist the Revenue for this purpose. Since the goods were still in the process of manufacture, the basis for confiscation and penalty was not made out.

Conclusion: The confiscation and penalty were not sustainable and the appeal was allowed.

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