1984 (1) TMI 307 - AT - Central Excise

Summary

Issues:
Imposition of penalty under Rule 173Q of Central Excise Rules, 1944 for clearance of goods without payment of Central Excise duty due to a clerical error.

Analysis:
The case involved an appeal by M/s Jay Engineering Works Ltd. against the imposition of a penalty of Rs. 500 under Rule 173Q of Central Excise Rules, 1944, due to the clearance of electric fans without payment of Central Excise duty amounting to Rs. 89,340.10. The appellant had deposited Rs. 95,000 basic excise duty and Rs. 4,750 special excise duty, but due to a clerical error, the amounts were entered twice in their P.L.A. register. The mistake was rectified by depositing the correct amount on 8th December, 1982, upon detection. The appellant claimed it was a bona fide mistake and highlighted the steps taken to rectify the error voluntarily. The appellant argued the absence of mens rea and cited various judgments to support their case, emphasizing that penalty proceedings require the establishment of mens rea.

The appellant's counsel emphasized the appellant's substantial annual Central Excise duty payments, the voluntary rectification of the error upon detection, and the proactive communication with Revenue Authorities before detection. The counsel cited judgments such as Hindustan Steel Ltd. v. State of Orissa and Nathulal v. State of M.P. to support the argument that a bona fide belief in non-liability should not attract penalties. The counsel argued that the absence of mens rea warranted the quashing of the imposed penalty.

In response, the Senior D.R. referred to Rule 173A(a) of Central Excise Rules, 1944, and cited the judgment of Indoglass Pvt. Ltd. & Ors. v. U.O.I. to argue that intention is not necessary for contravention. The Senior D.R. contended that the appellant should have exercised due care and paid duty before clearance of goods. The Senior D.R. also referenced a judgment by the same Bench in another case to support the argument for confirming the penalty.

After considering the arguments and judgments cited by both sides, the Member (J) held that the appellant's case aligned with the principles established in Hindustan Steel Ltd. v. State of Orissa. The Member (J) concluded that the error was a bona fide mistake, and as there was no mens rea established, the penalty of Rs. 500 was quashed. The Revenue was directed to refund the penalty amount within two months from the date of the order.

In conclusion, the appeal was allowed, and the penalty under Rule 173Q of Central Excise Rules, 1944 was set aside due to the absence of mens rea in the appellant's actions, as per the precedents cited and the principles of penalty proceedings.