Clandestine removal requires proof of attempted duty evasion; mere RG-1 non-entry cannot sustain confiscation.

Confiscation and redemption fine for alleged clandestine removal were unsustainable where the goods remained in the factory premises and there was no evidence of any attempt to clear them without payment of duty; mere non-entry in the RG-1 Register was insufficient to justify confiscation. The penalty for failure to account for production in the RG-1 Register was, however, warranted under Rule 173Q because the lapse was admitted after the goods reached the relevant inspection and grading stage. The penalty was therefore sustained but reduced as being disproportionate to the contravention.

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Issues: (i) Whether confiscation of the goods and the redemption fine were justified on the allegation of clandestine removal when the goods were found in the factory premises but had not been entered in the RG-1 Register; (ii) Whether the penalty imposed for non-accountal of the production in the RG-1 Register was liable to be reduced.

Issue (i): Whether confiscation of the goods and the redemption fine were justified on the allegation of clandestine removal when the goods were found in the factory premises but had not been entered in the RG-1 Register.

Analysis: The finding of clandestine removal was not supported by the facts, as the goods remained in the appellant's premises for a substantial period and there was nothing to show any attempt to remove them without payment of duty. Mere non-entry in the RG-1 Register, without proof of a scheme for clandestine clearance, was insufficient to sustain confiscation and redemption fine.

Conclusion: Confiscation and redemption fine were not sustainable and were set aside in favour of the assessee.

Issue (ii): Whether the penalty imposed for non-accountal of the production in the RG-1 Register was liable to be reduced.

Analysis: The appellant did not dispute the failure to account for the production in the RG-1 Register after the goods had reached the relevant inspection and grading stage. A penalty for contravention of Rule 173Q was therefore warranted, but the amount had to be commensurate with the nature of the lapse and the value of the goods.

Conclusion: The penalty was sustained but reduced to Rs. 10,000 in favour of the assessee.

Final Conclusion: The appeal succeeded to the extent that confiscation and redemption fine were annulled and the penalty was substantially reduced, leaving only a limited monetary liability for non-accountal.

Ratio Decidendi: Confiscation for alleged clandestine removal cannot be sustained without proof of an intention or attempt to remove goods without payment of duty, though non-accountal in statutory records may still justify a proportionate penalty.

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