Confiscation for excess stock requires evidence of clandestine removal; record-keeping lapse may attract only a reduced penalty.

Excess finished goods found within the factory and merely unmatched with the RG 1 register could not be confiscated or subjected to redemption fine absent evidence of clandestine removal or preparation for removal without payment of duty. The tribunal held that unrecorded stock alone did not justify confiscation where no attempt to clear the goods was shown, so those measures were set aside. For the statutory record-keeping lapse, however, a penalty was warranted, but it was reduced to a nominal amount, leaving the assessee liable only to the limited extent of that reduced penalty.

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Issues: (i) whether confiscation of excess finished goods and the redemption fine were sustainable in the absence of evidence of clandestine removal or preparation for removal without payment of duty; (ii) whether the personal penalty imposed for non-maintenance of statutory records was liable to be interfered with.

Issue (i): whether confiscation of excess finished goods and the redemption fine were sustainable in the absence of evidence of clandestine removal or preparation for removal without payment of duty.

Analysis: The finished goods were found in excess of the quantity recorded in the RG 1 register, but the record did not show any intention to remove the goods without payment of duty or any preparation for such removal. The goods remained within the factory premises, and the absence of evidence of clandestine removal brought the case within the principle that confiscation is not justified merely because stock is found unrecorded when no attempt to remove the goods is established.

Conclusion: The confiscation and the redemption fine were not sustainable and were set aside in favour of the assessee.

Issue (ii): whether the personal penalty imposed for non-maintenance of statutory records was liable to be interfered with.

Analysis: The penalty related to failure to maintain the statutory record properly. In the circumstances, while the confiscation could not stand, some penalty for the record-keeping lapse was warranted, but the amount required reduction.

Conclusion: The personal penalty was reduced to Rs. 2,000, in favour of the assessee to that extent.

Final Conclusion: The order was sustained only to the limited extent of a reduced penalty, while confiscation and redemption fine were set aside.

Ratio Decidendi: Confiscation of goods found in excess stock is unsustainable unless the record shows clandestine removal or preparation for removal without payment of duty; where only a record-keeping lapse is established, penalty may be reduced but confiscation and redemption fine cannot be upheld.

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