Unaccounted excisable goods manufactured without licence remain liable to confiscation and penalty even if duty demand is dropped.

Manufacture of excisable goods after crossing the exemption limit without obtaining a licence or following excise accounting formalities constituted contravention of the Central Excise Rules and Section 6. On those facts, the goods remained liable to confiscation under Rule 173Q and the manufacturer remained liable to penalty under Rules 9(2), 226 and 173Q. Dropping the duty demand did not remove the separate liability to confiscation or penal action. The monetary liabilities were only reduced on appeal, but the underlying finding of confiscability and penalty was maintained.

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Issues: Whether goods manufactured and kept unaccounted after crossing the exemption limit were liable to confiscation and whether penalty was sustainable even though the demand of duty had been dropped.

Analysis: The respondent had continued manufacture without obtaining an excise licence and without complying with excise formalities after crossing the exemption limit. This amounted to contravention of Rule 9(1) and Rule 52A of the Central Excise Rules and also of Section 6 read with Rules 53, 174, 226 and 173 of the Central Excise Rules. On those facts, the goods were liable to confiscation under Rule 173Q and the respondent was liable to penalty under Rule 9(2), Rule 226 and Rule 173Q. The dropping of the duty demand did not negate the liability to confiscation or penalty.

Conclusion: The confiscation and imposition of penalty were upheld, though the redemption fine and personal penalty were reduced.

Final Conclusion: The appeal succeeded only to the limited extent of reducing the monetary liabilities, while the substantive finding of confiscability and penal liability was maintained.

Ratio Decidendi: Where excisable goods are manufactured in breach of licensing and statutory accounting requirements, they remain liable to confiscation and penalty even if the duty demand is not pursued.

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