Non-accountal of raw materials sustained confiscation, but excessive redemption fine was reduced and penalty was set aside.

Non-accountal of raw materials under the Central Excise Rules supported confiscation where the allegation was not controverted in adjudication, and the plea that the goods were duty-paid was rejected. The redemption fine was found excessive on the facts and was reduced. A penalty linked to the duty demand on finished goods could not survive once confiscation of the finished goods had been set aside, and it was also not sustainable as a penalty for non-accountal of the raw materials. The confiscation was maintained, the fine was reduced, and the penalty was annulled.

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Issues: (i) Whether confiscation of the raw materials and the redemption fine imposed in lieu thereof were sustainable for non-accountal under Rule 173Q of the Central Excise Rules, 1944; (ii) Whether the penalty imposed on the appellants was sustainable.

Issue (i): Whether confiscation of the raw materials and the redemption fine imposed in lieu thereof were sustainable for non-accountal under Rule 173Q of the Central Excise Rules, 1944.

Analysis: The raw materials had been alleged in the proceedings to be liable to confiscation for non-accountal, and the appellants had not controverted that allegation in the adjudication stage. In these circumstances, the plea that the raw materials were duty-paid and therefore not liable to confiscation was not accepted. The finding that there was no justification for non-accountal of the raw materials was sustained. However, the redemption fine fixed by the lower appellate authority was considered excessive in the facts and circumstances.

Conclusion: Confiscation of the raw materials was upheld, while the redemption fine was reduced.

Issue (ii): Whether the penalty imposed on the appellants was sustainable.

Analysis: The penalty imposed by the adjudicating authority was found to be relatable to the duty demand concerning the finished goods, and not to the confiscation of the raw materials. Since confiscation of the finished goods had already been set aside, the penalty could not survive as a consequence of that demand. It was also not sustainable as a penalty for non-accountal of the raw materials.

Conclusion: The penalty was set aside.

Final Conclusion: The appeal succeeded only in part: the confiscation of the raw materials was maintained, the redemption fine was reduced, and the penalty was annulled.

Ratio Decidendi: Non-accountal of goods, when not controverted in the adjudicatory proceedings, can sustain confiscation under the applicable excise penalty provision, but a penalty unrelated to the surviving basis of liability cannot be upheld.

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