Non-accountal and clandestine removal under excise law require statutory coverage and positive evidence; unsupported penalties and fines fail.
Finished excisable goods not entered in RG-1 were liable to confiscation because non-accountal under the Central Excise Rules justified action under Rule 173Q, though the redemption fine was reduced. An unregistered dealer fell outside the direct scope of Rule 173Q, so redemption fine against that dealer was set aside, although confiscation linked to goods clandestinely received from the manufacturer was sustained only against the manufacturer. For goods alleged to have been clandestinely removed, confiscation could not stand without positive departmental evidence; the confiscation and fine for 346 rolls were therefore set aside. Penalties under Section 11AC, Rule 173Q and Rule 209A were curtailed where duty had already been paid or the underlying confiscation failed, while the fine on plant and machinery was sustained.
Issues: Whether goods found finished in the factory but not entered in RG-1 register were liable to confiscation under the Central Excise law; whether confiscation and redemption fine could be sustained against an unregistered dealer for goods found in its premises; whether confiscation of goods allegedly removed clandestinely to the dealer's premises was supported by evidence; whether penalties under Section 11AC, Rule 173Q and Rule 209A were sustainable.
Issue (i): Whether goods found finished in the factory but not entered in RG-1 register were liable to confiscation under the Central Excise law.
Analysis: RG-1 is the daily account required to be maintained under Rule 53 of the Central Excise Rules, 1944. Finished goods found in the factory without contemporaneous accountal could not be treated as duly accounted merely because the assessee claimed a practice of entering them only at the time of clearance. Non-accountal justified invocation of Rule 173Q for confiscation.
Conclusion: Confiscation of the 382 rolls was upheld, but the redemption fine was reduced.
Issue (ii): Whether confiscation and redemption fine could be sustained against an unregistered dealer for goods found in its premises.
Analysis: Rule 173Q, on its terms, applies to a manufacturer or producer of excisable goods and to a registered dealer. An unregistered dealer was outside its direct ambit. However, where the goods found in the dealer's premises were admitted to have been clandestinely removed by the manufacturer and received by the dealer, the offending character of the goods remained established as against the manufacturer.
Conclusion: Redemption fine against the unregistered dealer was set aside, while confiscation was sustained against the manufacturer in relation to the 104 rolls.
Issue (iii): Whether confiscation of goods allegedly removed clandestinely to the dealer's premises was supported by evidence.
Analysis: A finding of clandestine removal requires positive evidence from the department. In respect of the 346 rolls, the record did not contain adequate evidence to prove clandestine removal or to displace the claim that the goods were duty paid. Mere absence of proof from the noticees was insufficient.
Conclusion: Confiscation of the 346 rolls and the corresponding redemption fine were set aside.
Issue (iv): Whether penalties under Section 11AC, Rule 173Q and Rule 209A were sustainable.
Analysis: The penalty under Section 11AC could not survive for duty already paid before the show-cause notice and also could not survive where the underlying confiscation in respect of 346 rolls failed. The separate penalty linked to confiscation of goods and the penalty on persons under Rule 209A also could not stand where the confiscation against the dealer failed or where the company had already been penalised. The redemption fine relating to plant and machinery was retained.
Conclusion: The Section 11AC penalty and the penalties on the director and partners were set aside, while the redemption fine on plant and machinery was sustained.
Final Conclusion: The appeal was allowed in substantial part, with confiscation and associated fines/penalties curtailed where unsupported by evidence or beyond the rule's scope, while the confiscation of undisclosed finished goods and the fine on plant and machinery were maintained to the limited extent found justified.
Ratio Decidendi: Confiscation under excise law for non-accountal or clandestine removal must rest on the statutory scope of the invoked rule and on positive evidence, and penalties cannot survive where the underlying liability or evidentiary basis is absent.