Excise accounting practice and clandestine removal require proof of deliberate breach, not mere procedural lapses or private notes.

Long-standing excise accounting practices treated as procedural cannot be converted into violations without proof of deliberate contravention. The Tribunal found that delayed R.G. 1 entries on the third day, slab-value-wise accounting defects, and the alleged omission to maintain separate intermediate records were not sufficient to support adverse action where the method had departmental knowledge and no prior correction was shown. It also held that non-accountal findings did not justify confiscation or redemption fine on the facts, and that a private note-book, without reliable corroboration, could not by itself prove clandestine removal beyond the factory. The penalty and connected demands therefore could not survive.

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Issues: (i) Whether delay in making R.G. 1 entries till the third day was substantiated in view of the permission allegedly granted by the excise authorities; (ii) Whether the alleged non-accountal of processed fabrics, rags, fents and grey fabrics, and the consequential confiscation and redemption fine, were sustainable; (iii) Whether non-maintenance of slab-value-wise accounts under the notification justified penalty or adverse action; and (iv) Whether alleged illicit removal of fabrics could be inferred from the private note-book maintained in the factory.

Issue (i): Whether delay in making R.G. 1 entries till the third day was substantiated in view of the permission allegedly granted by the excise authorities.

Analysis: The permission record produced by the appellants referred to a prior departmental permission allowing entries in R.G. 1 on the third day, and the Tribunal found the adjudicating authority's rejection of that document unsustainable. It held that the departmental references should have been verified before drawing an adverse inference. The practice had continued for many years with departmental knowledge and was treated as a matter of procedure rather than an intentional violation.

Conclusion: The allegation of failure to maintain R.G. 1 on a daily basis was not proved.

Issue (ii): Whether the alleged non-accountal of processed fabrics, rags, fents and grey fabrics, and the consequential confiscation and redemption fine, were sustainable.

Analysis: The Tribunal accepted that the assessee maintained accounting at the grey stage and in the bonded stage, and that there was no practice of separate intermediate accounting in the finishing or packing room. It held that the long-standing accounting method had been known to departmental officers and that the alleged omission was procedural. On that basis, the finding of non-accountal was not treated as sufficient to sustain confiscation of the fabrics or the redemption fine.

Conclusion: The confiscation of the fabrics and the redemption fine were set aside.

Issue (iii): Whether non-maintenance of slab-value-wise accounts under the notification justified penalty or adverse action.

Analysis: The Tribunal accepted the practical difficulty pointed out by the appellants in maintaining value-slab-wise records for a large number of fabric varieties with fluctuating prices. It held that this was again a matter of procedure and that any defect should have been pointed out and corrected by the department rather than treated as an offence without prior warning.

Conclusion: The alleged slab-wise accounting defect did not justify adverse action.

Issue (iv): Whether alleged illicit removal of fabrics could be inferred from the private note-book maintained in the factory.

Analysis: The Tribunal held that the private note-book, at most, indicated movement of fabrics for processing within the factory and did not by itself establish removal out of the factory. It further found that the entries in the rough note-book were not shown to be superior to or inconsistent with the statutory records, and that once the other allegations of non-accountal failed, the basis for inferring clandestine removal disappeared.

Conclusion: Clandestine removal was not proved.

Final Conclusion: All material allegations failed, and the penalty and connected demands could not survive.

Ratio Decidendi: A long-standing departmental accounting practice treated as procedural cannot be converted into an offence without proof of deliberate contravention, and clandestine removal cannot be inferred from a private note-book unless it clearly establishes removal beyond the factory and is supported by reliable corroboration.

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