2002 (8) TMI 642 - AT - Central Excise

Penalty not imposable in the absence of confiscation of goods - Confiscation of goods - Non-accountal of goods

Summary

Issues:
1. Confiscation of goods under Rule 173Q for alleged contravention of Rules 53, 173G, and 226.
2. Imposition of penalty under Rule 173Q without mens rea.
3. Interpretation of RG-I stage for paper goods.
4. Applicability of Trade Notice on RG-I stage.
5. Compliance with RG-I format and Trade Notice requirements.

Confiscation of Goods under Rule 173Q:
The case involved the confiscation of goods by Central Excise officers from a paper manufacturing factory for alleged contravention of Rules 53, 173G, and 226. The officers found unpacked paper reels on the production floor, not accounted for in the RG-I register, leading to the seizure of goods. The Additional Commissioner upheld the confiscation and imposed a penalty of Rs. 5,00,000/- on the party. The Commissioner (Appeals) affirmed this decision, relying on a previous Tribunal decision. The appellants contested, arguing that the seized goods had not reached the RG-I stage, thus challenging the penalty under Rule 173Q.

Imposition of Penalty under Rule 173Q without Mens Rea:
The appellant's representative argued that the penalty imposed under Rule 173Q for contravention of Rules 53 and 173G should require a finding of mens rea, citing a Tribunal decision in a similar case. The absence of mens rea in the current case was highlighted as a reason to challenge the penalty. The question of intent to evade duty was central to the imposition of penalties under Rule 173Q.

Interpretation of RG-I Stage for Paper Goods:
The debate centered on whether the seized goods had reached the RG-I stage, crucial for determining liability for confiscation and penalties. The revised RG-I format introduced in 1992 included provisions for finished goods in the finishing room, which the appellant had not accounted for. The appellant argued that no specific instructions had been given regarding paper goods' RG-I stage, and past practices were considered acceptable.

Applicability of Trade Notice on RG-I Stage:
The Department relied on a Trade Notice clarifying the RG-I stage for paper goods, emphasizing the need for goods to be fully manufactured, packed, and weighed before entry. The Trade Notice's instructions were deemed binding, indicating that the seized unpacked goods did not meet the RG-I stage criteria outlined.

Compliance with RG-I Format and Trade Notice Requirements:
The Tribunal analyzed the appellant's compliance with the RG-I format and Trade Notice requirements. It was noted that the seized goods were not in a packed condition, aligning with the Trade Notice's definition of the RG-I stage. The Tribunal concluded that the seized goods had not reached the RG-I stage, leading to the setting aside of confiscation and penalty orders, allowing the appeal with consequential relief.