2014 (1) TMI 1213 - HC - Central Excise

Confiscation and penalty under Rule 173Q - Mens Rea - Clandestine removal of goods - Whether the provisions of Rule 173Q of the Central Excise Rules, 1944 is attracted in the absence of any intention to waive the payment of central excise duty and/or in absence of removal of any excisable goods or any entry of any excisable goods in RG-1 Register - Held that - show cause notice was issued to the appellant not only for holding of excess stock with the intention to clear the goods clandestinely and evade payment of central excise duty but also for deliberately mis-stating the production figures in RG-1 Register and filing of returns giving false production figures. It cannot, therefore, be contended that the show cause notice was issued only for violation of Rules 53 and 54 - Rule 173Q deals with confiscation and penalty and Rule 209 deals with penalty provision. Rule 173Q confiscation and penalty arise under breach of duty provided in the Central Excise Act and Central Excise Rules, which creates strict liability without proof of mens rea. As per Rule 173G(4)(a), every assessee to maintain such accounts, as the Commissioner may from time to time require of the production. Rule 53 deals with daily stock account and Rule 54 deals with monthly returns. Non-maintaining of accounts and non-accounting of the manufactured goods in the statutory records attracts the provision of Rule 173Q. Unless there is something in the language of the statute indicating the need to establish the element of mens rea, it is generally sufficient to show that a default to comply with the Rules has occurred attracting confiscation and penal provisions. There is nothing in Rule 173Q or Rule 209, which required that mens rea/intention need to be established - The Legislature used the conjunction or in Rule 173Q for Rule 173Q(1)(a) and Rule 173Q(1)(d), the Court cannot read into Rule 173Q(1)(b) that there should be the intention to evade payment of excise duty - mens rea of the appellant to remove the manufactured goods with intention to evade payment is not essential - appellant had not accounted for the manufactured goods and had not made entries in RG-1 Register. Non-accounting of manufactured goods in the statutory records falls within the ambit of Rules 173Q(1)(b) attracting provision of confiscation and penalty - Tribunal had taken a lenient view reducing the redemption fine to ₹ 3 lakhs and also penalty to ₹ 3 lakhs - Decided against assessee.

Issues Involved:

1. Applicability of Rule 173Q of the Central Excise Rules, 1944.
2. Requirement to account for excisable goods in RG-1 Register.
3. Imposition of penalty and confiscation under Rule 173Q read with Rule 209.
4. Mens rea (intention) requirement for invoking Rule 173Q.

Issue-wise Detailed Analysis:

1. Applicability of Rule 173Q of the Central Excise Rules, 1944:
The High Court examined whether Rule 173Q is attracted in the absence of any intention to waive the payment of central excise duty or removal of any excisable goods. The court noted that Rule 173Q deals with confiscation and penalty if a manufacturer does not account for excisable goods or contravenes any provisions with intent to evade duty. The court emphasized that the provisions of Rule 173Q are independent, and violation of any sub-clause attracts confiscation and penalty.

2. Requirement to account for excisable goods in RG-1 Register:
The appellant was found with an excess stock of MS Ingots not recorded in the RG-1 Register. The court highlighted that Rule 53 mandates every manufacturer to maintain a stock account, and Rule 54 requires filing monthly returns. The appellant's contention that the goods were unfinished and not required to be entered in the RG-1 Register was dismissed as an afterthought since it was not raised in the initial show cause replies. The court also noted that the appellant's request for provisional release of the seized goods contradicted their claim that the goods were not saleable.

3. Imposition of penalty and confiscation under Rule 173Q read with Rule 209:
The court upheld the imposition of penalty and confiscation under Rule 173Q read with Rule 209, stating that non-accounting of goods in statutory records is a clear violation. The court clarified that Rule 173Q(1)(b) mandates confiscation if any manufacturer does not account for excisable goods, and this provision is independent of the intention to evade duty. The Tribunal's decision to reduce the redemption fine and penalty to Rs.3 lakhs each was considered lenient and upheld by the court.

4. Mens rea (intention) requirement for invoking Rule 173Q:
The appellant argued that mens rea (intention to evade duty) is essential for invoking Rule 173Q. However, the court rejected this argument, stating that Rule 173Q creates strict liability without proof of mens rea. The court emphasized that the language of Rule 173Q does not indicate the need to establish mens rea, and the conjunction "or" in the rule suggests that each clause is independent. Therefore, non-accounting of manufactured goods in statutory records attracts confiscation and penalty provisions without the need to prove intent to evade duty.

Conclusion:
The High Court dismissed the appeal, affirming the Tribunal's order to reduce the redemption fine and penalty to Rs.3 lakhs each. The court concluded that non-accounting of excisable goods in statutory records attracts the provisions of Rule 173Q(1)(b) for confiscation and penalty, and there is no requirement to establish mens rea for invoking these provisions.

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