Semi-finished goods in factory premises are not liable to confiscation or penalty absent intent to remove them.

Valves found in the factory but still undergoing fitting, dressing, testing and painting were treated as semi-finished goods, not goods at the stage of removal. On those accepted facts, and in the absence of any finding contradicting the assessee's explanation or showing an intent to remove the goods in evasion of duty, confiscation and penalty under Rule 173Q of the Central Excise Rules were not sustainable. The governing principle is that goods remaining within the factory and not yet marketable for removal are not liable to confiscation merely because they are present in the premises.

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Issues: Whether valves found in the factory, which had not yet reached the finished stage or stage of removal, were liable to confiscation and penalty under Rule 173Q of the Central Excise Rules.

Analysis: The goods were found in the factory premises, and the assessee consistently stated that they were still to undergo fitting of components, dressing, testing and painting before becoming marketable for removal. These specific pleas were raised at the time of the visit and in reply to the show cause notice, but were not contradicted by any finding of the adjudicating or appellate authority. On the facts accepted on record, the goods were only semi-finished. The legal position applied was that goods remaining in the factory and not yet at the stage of removal are not liable to confiscation under Rule 173Q, particularly where there is no material showing intent to remove them in evasion of duty.

Conclusion: The valves were not liable to confiscation under Rule 173Q of the Central Excise Rules, and no penal action could be sustained against the assessee.

Ratio Decidendi: Goods remaining within the factory and not yet reaching the stage of removal, when supported by an uncontroverted plea of unfinished manufacture, are not liable to confiscation or penalty under Rule 173Q of the Central Excise Rules.

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