Non-accountal of raw materials cannot by itself sustain confiscation or penalty under Rule 173Q(1).

Non-accountal of raw materials, by itself, does not establish duty evasion or justify confiscation under Rule 173Q(1) of the Central Excise Rules, 1944. The Tribunal noted that raw materials received in the factory but not entered in prescribed records are not liable to confiscation merely on an inference of intended misuse, because Rule 173Q(1)(b) is directed to excisable goods manufactured, produced or stored by the assessee, not to raw materials. On that basis, confiscation and penalties were held unsustainable and the matter was decided in favour of the assessee.

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Issues: Whether raw materials not entered in the records could be confiscated and penalties sustained under Rule 173Q(1) of the Central Excise Rules, 1944.

Analysis: The confiscation was based on an inference that the raw material was intended to be used without accounting. The Tribunal held that non-accountal of raw material by itself does not establish duty evasion and that raw materials received in the factory but not entered in the prescribed records are not liable to confiscation on that footing. It further held that Rule 173Q(1)(b) is directed to excisable goods manufactured, produced or stored by the assessee and does not extend to raw materials.

Conclusion: The confiscation and penalties were unsustainable and the issue was decided in favour of the assessee.

Ratio Decidendi: Non-accountal of raw materials, without more, does not justify confiscation or penalty under Rule 173Q(1), which applies to excisable goods manufactured, produced or stored and not to raw materials.

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