2008 (11) TMI 555 - AT - Central Excise

Summary

Issues involved:
Violation of Central Excise Rules regarding maintenance of accounts for corrugated boxes, imposition of penalties under Rule 25, mens rea requirement for penalty imposition, compliance with registration certificate amendments, production and clearance declarations, and account maintenance.

Analysis:

Violation of Central Excise Rules:
The Appellant, engaged in manufacturing glass articles, began producing corrugated boxes for packaging from August 2004. However, Central Excise Officers found discrepancies during a visit in December 2004, as the account of corrugated boxes in the RG-I register was not maintained as required by Rule 10 of the Central Excise Rules, 2002. This led to the seizure of 99,000 cartons of corrugated boxes and the imposition of penalties.

Imposition of Penalties under Rule 25:
The Assistant Commissioner confirmed the demand for wrongly taken Modvat credit and imposed penalties under Rule 25 of the Central Excise Rules. On appeal, the Commissioner (Appeals) upheld the demand and one penalty but set aside another penalty and the confiscation of goods. The Tribunal allowed an appeal regarding the denial of Cenvat credit. The current appeal by the Revenue challenges the setting aside of the confiscation and penalty under Rule 25.

Mens Rea Requirement for Penalty Imposition:
The Departmental Representative argued that penalties were rightly imposed under Rule 25 due to non-compliance with account maintenance and registration certificate amendments. Citing precedent, it was contended that mens rea is not required for penalty imposition under Rule 25, similar to the decision in CCE v. Modison Ltd.

Compliance with Registration Certificate Amendments and Account Maintenance:
The Respondent's counsel argued that there was no intent to evade duty, as corrugated boxes were solely for packaging glass articles. They highlighted the lack of guidance and the timing of the visit post the start of corrugated box production. The counsel cited a High Court decision requiring mens rea for penalty imposition under Rule 25. They also questioned the validity of the show cause notice invoking Rule 25 without specifying the sub-rule.

Conclusion:
The Tribunal found that the Appellant's failure to amend the registration certificate, declare production and clearance of corrugated boxes, and maintain proper accounts constituted a violation of the Central Excise Rules. Ignorance of the law was not accepted as an excuse for non-compliance. Following precedent, the Tribunal upheld the imposition of penalties under Rule 25 without requiring mens rea. The order setting aside the penalties and confiscation was overturned, and a modified penalty and redemption fine were imposed to serve justice.