RG 1 non-entry of finished paper samples did not justify duty and penalty where goods remained inside the factory.

Finished paper samples retained inside the factory were treated as excisable goods that should have been entered in the RG 1 register, and the omission amounted to a procedural lapse. However, duty demand and penalty were held unsustainable because the goods were still within the factory when checked, confiscation was not pursued, and the assessee could reasonably rely on a long-standing practice suggesting that separate entry was unnecessary. On that basis, the demand and penalty were set aside in favour of the assessee.

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Issues: Whether finished paper samples kept within the factory premises as retained samples, though not entered in the RG 1 register, could attract duty and penalty merely on the ground of non-accountal and alleged removal without payment of duty.

Analysis: The samples were fully finished excisable goods and ought to have been reflected in the RG 1 register, including their subsequent re-pulping or other disposal. The omission to make such entry constituted a lapse. However, the goods were admittedly still inside the factory when the officers visited, the charge of confiscation was not pursued, and the record indicated a long-standing practice under which the assessee could reasonably have believed that separate entry was unnecessary. In those circumstances, the demand of duty and imposition of penalty were considered unsustainable.

Conclusion: The issue is decided in favour of the assessee; duty and penalty were set aside.

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