1985 (3) TMI 289 - AT - Central Excise

Summary

Issues Involved:
1. Non-accounting of excisable goods.
2. Contravention of Central Excise Rules.
3. Imposition of penalty under Rule 173Q.
4. Confiscation of goods under Rule 226.
5. Mens rea requirement for penalty under Rule 173Q.
6. Validity of show cause notice.

Issue-wise Detailed Analysis:

1. Non-accounting of excisable goods:
The Tribunal observed that the goods found outside the approved store-room should have been entered in the R.G.1 register. The failure to do so constituted non-accounting of excisable goods as required under Rule 173Q(b). The combined R.G.1-E.B.4 register is a prescribed document, and non-entry in this register means the goods were not accounted for as per the rules.

2. Contravention of Central Excise Rules:
The goods were seized for violation of the Central Excise Rules as they were deemed unaccounted and considered meant for clandestine removal. The Deputy Collector held that the goods should have been entered in the R.G.1 account and did not accept the plea of clerical mistake. The Collector (Appeals) found that there had been a practice of entering goods at the point of storage in the bonded store-room, which the Department was aware of. However, the Tribunal found that this practice did not justify non-compliance with the rules.

3. Imposition of penalty under Rule 173Q:
The Tribunal noted that Rule 173Q(1) consists of four sub-clauses, and mens rea is not necessary for sub-clauses (a), (b), and (c). The absence of reference to intent in these sub-clauses indicates that intent is not a material consideration. The Deputy Collector's finding that mens rea was necessary for imposing a penalty under Rule 173Q was incorrect. The penalty under Rule 173Q(b) was upheld, but the penalty under Rule 173Q(d) was not substantiated.

4. Confiscation of goods under Rule 226:
The Tribunal upheld the confiscation of goods under Rule 226, Rule 173Q(1)(b) read with Rule 226, and Rule 173Q(1)(b) read with Rules 173G(4) and 53 for specific serial numbers. The goods were found to be in a finished condition and should have been kept in the bonded store-room. The Tribunal modified the order, giving the respondents an option to redeem the goods on payment of a fine.

5. Mens rea requirement for penalty under Rule 173Q:
The Tribunal referred to the Supreme Court's decision in the Indo-China Steam Navigation Company case, which held that mens rea is not an essential ingredient for certain statutory offences. The structure of Rule 173Q(1) indicates that mens rea is not required for sub-clauses (a), (b), and (c). The Collector (Appeals) erred in holding that mens rea was necessary for imposing a penalty under Rule 173Q.

6. Validity of show cause notice:
The Tribunal found no illegality in the show cause notice or the order on the score of vagueness. The show cause notice clearly charged the respondents with contravention of specific rules and indicated the nature of the violation. The Deputy Collector's order specified the sub-clauses of Rule 173Q that were violated.

Conclusion:
The Tribunal set aside the order of the Collector of Central Excise (Appeals) and restored the order of the Deputy Collector of Central Excise with modifications. The confiscation of goods under specific serial numbers was upheld, and the penalty was reduced. The Tribunal clarified the legal requirements for accounting of excisable goods and the application of penalties under the Central Excise Rules.