Judgment:
1. The above appeal arises out of the order passed by the Collector of Central Excise, Chandigarh.
' 2. The brief facts of the case are that on 9-6-1994, Anti-Evasion officer's of Central Excise Collectorate visited the factory premises of the appellants who are engaged in the manufacture of cement clinkers falling under Chapter 25 of the CETA, 1985. They noticed that the appellants had installed another unit Gagal Unit II adjacent to the existing Unit I for which they had already obtained Central Excise Registration in February, 1994. The officers noticed that certain quantity of clinkers had been produced but not entered in the statutory records like RG-I register by Unit 2 and a statement of Shri V.K.Trivedi, Dy. General Manager of the appellant was recorded on the date of visit. In his statement he admitted that the appellants had not maintained any statutory records and also not filed RT-12 returns or classification list. He further stated that 4790 Mts. of clinkers had been produced during the trial run and entered in their private record but not entered in their statutory records since the goods were awaiting testing to see whether they satisfy the commercial requirement. A show cause notice was issued levelling the charge of clandestine removal of clinkers without payment of duty, proposing confiscation and imposition of penalty. The Collector in the impugned order held that the goods were liable to confiscation, but since the goods had been released provisionally to the appellants and were, therefore, not available for confiscation, he appropriated an amount of Rs. 1 lakh out of the bank guarantee of Rs. 12.5 lakhs executed by the appellants and in addition thereto, he imposed penalty of Rs. 25,000/-.
Hence this appeal.
3. I have heard Shri A.N. Haksar, Senior Advocate along with Shri R.Pandey, learned Counsel and Shri V.R. Sethi, learned DR.4. Learned Counsel is correct in pointing out that once explanation offered by the appellants that the clinkers found had not been entered in the statutory record in it was produced during the trial run and that there was no evidence of clandestine removal [on] record, confiscation is not warranted. Failure to maintain the statutory records and failure to file classification lists amounts to contravention of the Rules giving rise to penal liability. But in the absence of any finding that the goods were meant for clandestine removal and in the wake of the appellants offering a satisfactory explanation about the "non-entry in the statutory records because the goods had not yet been tested for commercial production, I hold that the goods were not liable to confiscation and accordingly set aside the confiscation of the seized quantity of 4790 MTs. Therefore,'-the action of the appropriation of an amount of Rs. 1 lakh out of the bank guarantee executed by the appellants in lieu of confiscation is also bad in law. Since penalty is warranted for contravention of the Rules, I hold that the appellants are liable to penalty, but in the facts and circumstances of the case, reduce the penalty to Rs. 10,000/-. The impugned order is modified and disposed of in the above terms with consequential relief, if any, due to the appellants, in accordance with law.