Non-marketable goods kept for testing need not be entered in the R.G.I. register; penalty and security deposit appropriation fail.

Goods kept for testing and re-processing were treated as not yet marketable because they remained untested, moisture-affected and stored in bags for further processing before sale. On those facts, the obligation to make a production entry in the R.G.I. register did not arise, as the goods were not in a fully manufactured condition. In the absence of any contravention, the basis for penalty and for appropriating the security deposit towards confiscation fine failed, and the assessee succeeded.

---

---

Issues: Whether goods kept for testing and re-processing, which were not yet marketable, were required to be entered in the R.G.I. register and whether penalty and appropriation of security deposit were justified.

Analysis: The goods were found to be untested and affected by moisture, and the evidence showed that they were kept in bags for further processing before sale. The stated practice of storing such goods outside the BSR and not entering them in the R.G.I. register had been followed earlier as well. On these facts, the goods were not in a marketable or fully manufactured condition, and the requirement to make a production entry did not arise. In the absence of a contravention, the foundation for penalty and for appropriation of the security deposit towards confiscation fine failed.

Conclusion: The issue was decided in favour of the assessee; the levy of penalty and the appropriation of the security deposit were set aside.

---