Confiscation for delayed accountal of exempt goods was unwarranted, and penalty was capped at the statutory maximum.

A procedural lapse in entering exempt grey cloth in the statutory R.G. 1 register and maintaining accounts did not justify confiscation, because the contravention was confined to delayed accountal rather than any substantive duty evasion. The Tribunal held that confiscation and redemption fine were unwarranted on these facts, and that the penalty for non-maintenance of accounts and improper register entries was limited by Rule 226 to the prescribed maximum. The penalty was therefore reduced to the statutory ceiling in favour of the assessee.

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Issues: Whether confiscation of exempt grey cloth and the redemption fine were justified for delayed entry in R.G. 1 register and non-maintenance of accounts, and whether the penalty was liable to be reduced to the maximum prescribed under Rule 226.

Analysis: The input involved was grey cloth exempt from duty, and the lapse found was only a delay in making entries in the statutory register and maintaining accounts. The Tribunal held that such a discrepancy did not justify confiscation and that the penalty for non-maintenance of accounts and improper entries in the register was governed by Rule 226, which prescribed a maximum penalty of Rs. 2,000.

Conclusion: The confiscation and redemption fine were set aside, and the penalty was reduced to Rs. 2,000 in favour of the assessee.

Ratio Decidendi: Where the contravention is confined to a procedural lapse in accountal of exempt goods, confiscation is unwarranted and penalty cannot exceed the statutory maximum prescribed for that infraction.

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