RG-1 record-keeping for finished goods must be made on completion of manufacture; later grading does not defer liability.

Finished goods must be entered in RG-1 as soon as manufacture is complete; post-manufacture grading and sticker affixation do not defer that recording duty. Goods found in a bonded store room without corresponding RG-1 entries were treated as manufactured goods, so non-compliance with the statutory stock record requirement attracted liability under Rule 173Q(1)(b). A plea that the lapse was bona fide or without mens rea was not accepted as a complete defence to breach of statutory records, though such circumstances may have only a mitigating effect. Confiscation and personal penalty were therefore sustained on the basis of the record-keeping contravention.

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Issues: Whether manufactured goods found in the bonded store room without entry in the RG-1 register attracted confiscation and personal penalty under the Central Excise Rules, and whether absence of mens rea or a bona fide practice of making entries only after grading and sticker affixation could exonerate the assessee.

Analysis: The statutory requirement is that RG-1 entries must be made as soon as manufacture is complete. Grading and affixation of stickers are post-manufacture processes undertaken for marketing and do not postpone the obligation to account for finished goods. Goods stored in the bonded store room were treated as manufactured goods, and their presence there without corresponding RG-1 entries established non-compliance. The plea of absence of mens rea was not accepted as a complete answer in proceedings for breach of statutory records, since a bona fide lapse may at best have a mitigating effect but does not by itself wipe out liability where the rule is contravened.

Conclusion: The assessee was liable under Rule 173Q(1)(b); confiscation and personal penalty were upheld and the objections based on semi-finished status and absence of mens rea were rejected.

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