Non-entry in RG-1 alone cannot justify confiscation or penalty without evidence of clandestine removal.

Mere non-entry of goods in the RG-1 register does not, by itself, justify confiscation under the Central Excise Rules; evidence of clandestine removal or intended evasion is required. The Tribunal found that the record showed accounting of the disputed stock and that the RG-1 extracts had not been properly considered, so the assumption of evasion could not stand. As confiscation was unsustainable, the connected penalties on the directors also had no basis.

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Issues: Whether mere non-entry of goods in the RG-1 register, without evidence of clandestine removal, justified confiscation and penalty; and whether the consequential penalty on the directors could survive.

Analysis: The disputed stock was found in the factory and the core controversy was whether it represented unaccounted goods liable to confiscation. The Tribunal found that the relevant RG-1 extracts had not been properly considered and that the record showed accounting of the goods in question. It held that non-entry by itself does not establish clandestine clearance. For confiscation under the Central Excise Rules, something more than absence of entry is required, namely material showing intended clandestine removal. In the absence of such evidence, the assumption of evasion could not stand. Since the confiscation itself was not sustainable, the basis for imposing penalty on the connected persons also disappeared.

Conclusion: Confiscation and penalties were not sustainable; the appeals succeeded and the orders below were set aside.

Ratio Decidendi: Mere non-entry of goods in statutory stock records does not, by itself, justify confiscation or penalty unless accompanied by evidence of clandestine removal or intended evasion.

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