Non-accountal of finished excisable goods supports confiscation, while penalty fails without notice and proof of evasion.

Non-accountal of finished excisable goods found in the factory justified confiscation and redemption fine under Rule 173Q(1)(b), because the goods were admitted to be fully finished and there was no reliable evidence that they were only awaiting testing. Penalty could not be sustained, as no intent to remove the goods without duty was established and no penalty had been proposed in the show cause notice. The assessee's SSI exemption claim under Notification No. 175/86 required factual examination and was remanded for limited reconsideration of duty liability on that basis.

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Issues: (i) whether finished excisable goods not entered in RG 1 and found in the factory were liable to confiscation and redemption fine under Rule 173Q(1)(b); (ii) whether penalty could be sustained when no such proposal was made in the show cause notice; (iii) whether the assessee's claim for SSI exemption under Notification No. 175/86 required reconsideration by the original authority.

Issue (i): whether finished excisable goods not entered in RG 1 and found in the factory were liable to confiscation and redemption fine under Rule 173Q(1)(b).

Analysis: The goods were admitted to be fully finished excisable goods lying in the factory, and there was no reliable evidence that they were only awaiting testing. Rule 173Q(1)(b) expressly renders excisable goods liable to confiscation where a manufacturer fails to account for them. The authorities cited by the assessee were distinguished because they dealt with different facts and did not consider confiscation under clause (b) in the same manner.

Conclusion: The confiscation and the redemption fine were upheld, and the Revenue's plea for enhancement of the redemption fine was rejected.

Issue (ii): whether penalty could be sustained when no such proposal was made in the show cause notice.

Analysis: No evidence was produced to establish an intention to remove the goods without payment of duty. In any event, penalty had not been proposed in the show cause notice, which made its imposition unsustainable on that ground as well.

Conclusion: The penalty was set aside and the Revenue's request for enhancement of penalty was rejected.

Issue (iii): whether the assessee's claim for SSI exemption under Notification No. 175/86 required reconsideration by the original authority.

Analysis: The SSI exemption issue was a legal claim requiring examination in the light of evidence to be placed before the original authority. Since it had not been considered earlier, a limited remand was appropriate for determination of the duty liability on that basis.

Conclusion: The matter was remanded for limited reconsideration of the SSI exemption claim and corresponding duty liability.

Final Conclusion: The order sustained the confiscation and redemption fine, disallowed penalty, rejected the Revenue's enhancement plea, and sent the case back only for limited examination of the SSI exemption claim and resultant duty liability.

Ratio Decidendi: Non-accountal of finished excisable goods attracts confiscation under Rule 173Q(1)(b), but penalty cannot be sustained without a factual basis for evasion and without its proposal in the show cause notice; a separately raised legal claim for SSI exemption may be remanded for factual examination.

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