Factory record-keeping breaches justify confiscation and penalty, but goods inside premises without removal evidence may escape confiscation.

Confiscation of a turbine was unwarranted because it was found within the factory premises, defect testing was recorded in the log sheet, and there was no evidence of attempted removal without duty payment; the confiscation was therefore set aside. Scrap found lying in and outside the factory premises, not entered in statutory records and admitted as weighed by the authorised signatory, was treated as removed without accounting or duty payment, so confiscation was upheld. For the same record-keeping contravention, the penalty under Rule 173Q of the Central Excise Rules, 1944 was sustained.

---

---

Issues: (i) Whether confiscation of the turbine was justified when it was found lying within the factory premises and there was no attempt to remove it without payment of duty; (ii) whether confiscation of the scrap was justified when the scrap was found lying outside the factory building and was not entered in the statutory records; (iii) whether the penalty imposed under Rule 173Q of the Central Excise Rules, 1944 was sustainable.

Issue (i): Whether confiscation of the turbine was justified when it was found lying within the factory premises and there was no attempt to remove it without payment of duty.

Analysis: The turbine was tested and defects were recorded in the log sheet, which was also noticed by the adjudicating authority. The record did not show any attempt by the assessee to remove the turbine without payment of duty. In such circumstances, confiscation was not warranted.

Conclusion: Confiscation of the turbine was set aside in favour of the assessee.

Issue (ii): Whether confiscation of the scrap was justified when the scrap was found lying outside the factory building and was not entered in the statutory records.

Analysis: The scrap was found lying in and outside the factory premises, its weighment was admitted by the authorised signatory, and no statutory record was maintained for it. The material was treated as having been removed from the factory without accounting and without payment of duty.

Conclusion: Confiscation of the scrap was upheld against the assessee.

Issue (iii): Whether the penalty imposed under Rule 173Q of the Central Excise Rules, 1944 was sustainable.

Analysis: As both the turbine and the scrap were not duly entered in the statutory record, the contravention attracting penal action remained established.

Conclusion: The penalty was upheld against the assessee.

Final Conclusion: The appeal succeeded only to the extent of the turbine, while the confiscation of the scrap and the penalty were sustained.

Ratio Decidendi: Confiscation is not justified where goods are found within the factory and there is no evidence of attempted removal without payment of duty, but confiscation and penalty are sustainable where goods are removed or kept without accounting in the statutory records.

---