RG-1 non-entry is only a procedural lapse; confiscation and penalty under Rule 173Q require evasion-linked conduct.

Mere non-entry of manufactured goods in the RG-1 register, without any allegation of removal or attempted removal with intent to evade duty, does not justify confiscation or penalty under Rule 173Q of the Central Excise Rules, 1944. The procedural lapse may still attract limited action under Rule 226 where goods are not recorded in the statutory register, but the breach is treated as technical rather than substantive. On that basis, the harsher consequences were reduced: the penalty and redemption fine were scaled down, and confiscation of plant and machinery was set aside. The operative distinction is between an evasion-linked contravention and a record-keeping default.

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Issues: (i) Whether confiscation and penalty under Rule 173Q of the Central Excise Rules, 1944 were sustainable where manufactured goods were not entered in the RG-1 register but there was no allegation of removal or attempted removal with intent to evade duty; (ii) whether confiscation and penalty could nevertheless be sustained under Rule 226 of the Central Excise Rules, 1944, and what relief should follow.

Issue (i): Whether confiscation and penalty under Rule 173Q of the Central Excise Rules, 1944 were sustainable where manufactured goods were not entered in the RG-1 register but there was no allegation of removal or attempted removal with intent to evade duty.

Analysis: The non-entry in the RG-1 register was admitted, but the contravention was confined to that procedural lapse. The legal requirement for invoking Rule 173Q was treated as involving removal, attempted removal, or an intent to evade duty. In the absence of any such allegation, confiscation and penalty under that rule could not be justified.

Conclusion: Confiscation and penalty under Rule 173Q of the Central Excise Rules, 1944 were not sustainable.

Issue (ii): Whether confiscation and penalty could nevertheless be sustained under Rule 226 of the Central Excise Rules, 1944, and what relief should follow.

Analysis: Since the goods were not entered in the statutory register, resort to Rule 226 was considered permissible. However, the lapse was treated as procedural rather than substantive, and there was no mala fide. On that basis, the penalty and redemption fine were reduced, and confiscation of plant and machinery was set aside.

Conclusion: Relief was granted by reducing the penalty and redemption fine and by setting aside confiscation of plant and machinery, while sustaining action only to the limited extent permissible under Rule 226 of the Central Excise Rules, 1944.

Final Conclusion: The order was modified so that the harsher consequences under Rule 173Q fell away, with only limited consequences retained for the procedural lapse.

Ratio Decidendi: Mere non-entry of manufactured goods in the RG-1 register, without removal or attempted removal with intent to evade duty, does not attract confiscation or penalty under Rule 173Q of the Central Excise Rules, 1944; at most, limited action may be taken for the procedural breach under the appropriate rule.

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