Clandestine removal and RG 1 non-entry allegations fail on current material; confiscation and penalties need fresh adjudication.

Allegations of clandestine removal and clearance of prime material as scrap were found unproved because the stock comparison relied on mismatched categories of goods and the statements cited did not establish diversion of prime material or undervaluation. The resulting duty demand could not be sustained on that material. Maintenance of RG 1 records remained mandatory, but the effect of non-entry depended on whether the omission was deliberate, negligent, or consistent with a bona fide trade practice. As that explanation had not been properly examined, the questions of confiscation and penalties were remanded for fresh adjudication after hearing the appellant.

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Issues: (i) Whether the alleged clandestine removal of excisable goods and clearance of prime material as scrap was established so as to sustain the duty demand. (ii) Whether the failure to make contemporaneous RG 1 entries and the consequential confiscation and penalties could be sustained without a proper determination of the appellant's plea of prevailing practice and bona fide conduct.

Issue (i): Whether the alleged clandestine removal of excisable goods and clearance of prime material as scrap was established so as to sustain the duty demand.

Analysis: The duty demand rested on a comparison between physical stock of finished packed goods and figures shown in tax and production records, but the comparison did not account for semi-finished goods and unpacked finished goods. The stock figures relied upon were not of the same category of goods, and the physical verification itself was limited to packed final products and raw material. The allegation that prime material had been cleared as scrap was also unsupported, because the statements relied upon only showed purchases of scrap at scrap prices and did not establish payment over and above billed value or any diversion of prime goods.

Conclusion: The allegation of clandestine removal and undervalued clearance was not proved, and the demand on that basis could not be sustained.

Issue (ii): Whether the failure to make contemporaneous RG 1 entries and the consequential confiscation and penalties could be sustained without a proper determination of the appellant's plea of prevailing practice and bona fide conduct.

Analysis: Maintenance of RG 1 entries is mandatory, but the gravity of breach depends on whether the omission was deliberate, negligent, or attributable to a bona fide trade practice. The appellant's plea was that entries were made when goods were ready for removal in accordance with an established practice, and that this aspect required fair adjudication. Since the appellant's explanation had not been properly examined on that footing, the matter required reconsideration by the authority.

Conclusion: The issue required fresh consideration and was remanded for decision according to law after hearing the appellant.

Final Conclusion: The duty demand based on the alleged shortage and scrap allegations did not survive on the material discussed, while the questions relating to RG 1 practice and its consequences were sent back for fresh adjudication; consequently, the penalties and confiscation could not stand in their existing form.

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