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My HTACCESS file has a 404 error document specified, and I removed the 400 pages from my server so they don't serve up a 200 status.
In Google's Webmaster Tools > Diagnostic > Web Crawl, in the Not Found category it's showing about 400 or so pages as NOT Found.
Is this OK?
Since I didn't restructure my site and didn't move those category pages anywhere, but just removed them and therefore potentially duplicate pages, then I wouldn't need a 301 redirect right?
The NOT FOUND status for google is normal and not penalizing?
The only kind of trouble from lots of not found pages might come if your existing pages still hold links to the urls, so make sure the internal links are all fixed. Even then, I don't know about getting a true penalty -- it's just a bad quality signal to have lot of broken links. So just run a link checker across the domain to ensure that you removed all the old links.
Google will probably spider those urls for quite a while, just double checking based on their historical records. Have no concern about that.
Google will clean their index eventually, but will show those URLs as Supplemental Results for a year. Make sure that the 404 page has clear navigation links pointing to the major sections of your site.