You should see expiry events being thrown saying how many items were deleted for what retention categories.

It could possibly be a number of things

1. Items are archiving with the wrong retention category
2. The retention category may be set to not allow deletion of items
3. The items may be placed on legal hold from Discovery Accelerator
4. Storage Expiry may be disabled or schedule not set to run
5. Storage Expiry may be set to run in report mode
6. Storage Expiry may be set to run when EV is in backup mode
7. The Journal Archive itself is set to not delete items through expiry

So the questions are:
1. How are you determining that items are not being deleted?
2. What is the retention category set for journal items?
3. Is the retention set to not delete items?
4. Are you expiring based on Modified Date (Sent/Received) or by Archived Date?
5. What Storage are you using? is it a NetApp with Snaplock or Centera in governance mode? or a WORM device?
6. When is your Expiry set to run? is it in report mode at all?

So the questions are:
1. How are you determining that items are not being deleted?

A) From outlook client I open up "Search Vault" --> Select journal mailbox from drop down --> apply filter (message older than 3 years) and click on find now...I got lot of messages older than 3 years

2. What is the retention category set for journal items?

A) 3 Years.

3. Is the retention set to not delete items?

No.
4. Are you expiring based on Modified Date (Sent/Received) or by Archived Date?

Modified Date

5. What Storage are you using? is it a NetApp with Snaplock or Centera in governance mode? or a WORM device?

The storage is local to the server. It is Dell PE 2800 with about 1.8 TB

6. When is your Expiry set to run? is it in report mode at all?

I do not think so. Please look at this pics

Thank you.

When you do the search, do you see it being tagged as an item with Business Retention?
Also do you use Discovery Accelerator?
Do you get any Event 7085's from Storage Delete?
Should say something like
 

Storage Expiry Report
Value Store Name: your Store
Vault Store Id: 195F8368B695FA3479FCCFC2175D065431210000yourSite
Number Of Vaults Processed: 568
Numbers of Vaults Enabled for Expiry 568
Total Number of Expired Items Deleted: 2405
Total Number of Items that could not be deleted: 0

Items Marked with sent\received date based retention categories have been deleted:
Business (3 Years): 2405

Items marked with archived date based retention categories have been deleted:
(none)

Start Time: 10/24/2012 5:37PM
End Time: 10/24/2012 5:42PM
 

Sorry, I am unable to figure out how I can find item's tagged. Here is what I see in search. It does not show rentetion catagory

Yes, few user uses DA.

Yes, I do get 7085's in event viewer and it does show # of items deleted

Thanks for looking.