Confiscation fails without evidence of clandestine removal, but statutory record-keeping breaches can still attract a reduced penalty.

Confiscation of seized cement clinkers is not justified where the goods were found during a trial run and there is no evidence of intended clandestine removal; a mere failure to make entries in statutory records or file returns does not by itself support confiscation. Breach of record-keeping and classification-list obligations may nevertheless attract penal liability, even when confiscation fails, and the penalty may be reduced where the circumstances so warrant. The stated result is that confiscation and related appropriation from the bank guarantee were set aside, while penalty was sustained at a reduced amount.

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Issues: (i) whether the seized quantity of cement clinkers was liable to confiscation on the allegation of clandestine removal without payment of duty; and (ii) whether penalty was payable for failure to maintain statutory records and file returns, and if so, to what extent.

Issue (i): Whether the seized quantity of cement clinkers was liable to confiscation on the allegation of clandestine removal without payment of duty.

Analysis: The clinkers were found during a trial run, and the non-entry in statutory records was explained on the ground that the goods had not yet been tested for commercial production. In the absence of evidence showing that the goods were intended for clandestine removal, the omission to maintain records and file returns did not justify confiscation of the goods.

Conclusion: Confiscation of the seized quantity was not sustainable and was set aside in favour of the appellant.

Issue (ii): Whether penalty was payable for failure to maintain statutory records and file returns, and if so, to what extent.

Analysis: The failure to maintain statutory records and to file classification lists constituted contravention of the applicable rules and attracted penal liability, even though confiscation was unwarranted. However, the circumstances justified a reduction in the quantum of penalty.

Conclusion: Penalty was upheld, but it was reduced to Rs. 10,000 in favour of the appellant.

Final Conclusion: The order was modified by setting aside confiscation and the related appropriation from the bank guarantee, while sustaining penalty at a reduced amount.

Ratio Decidendi: Confiscation cannot be sustained in the absence of evidence of clandestine removal, but breach of statutory record-keeping and return-filing requirements may still justify a reduced penalty.

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