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2006 (7) TMI 238 - AT - Central ExciseInterpretation of statute - Excise Duty/Cenvat credit - clear finished goods - whether there is any need for mens rea for warranting confiscation and penalty under the provisions of Rule 173Q(1)(a), (b) (c) of the Central Excise Rules, 1944 - HELD THAT - The decision of the Apex Court in Gujarat Travancore Agency v. CIT, 1989 (5) TMI 1 - SUPREME COURT cited by the learned SDR, in the context of Sections 271(1)(a) of the Income Tax Act, 1961, is also very relevant. The Apex Court has held in paragraph 4 that in the case of proceedings u/s 271(1)(a) which provides that a penalty may be imposed if the Income Tax Officer is satisfied that any person has without reasonable cause, failed to furnish the return of total income, the intention of the legislature is to emphasise the fact of loss to Revenue and to provide for a remedy for such loss, although no doubt an element of coercion is present in the penalty. The Court held that 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 prove that a default in complying with the statute has occurred. The Apex Court held that there is nothing in Section 271(1)(a) requiring that mens rea must be proved before penalty can be levied under that provision contrasted with the provisions of Section 276C wherein the element of mens rea was required to be established before imposition of any sentence under that provision. Another judgment relevant in the context of necessity of the ingredient of mens rea is the Supreme Court's decision in the case of Indo-China Steam Navigation Co. Ltd. v. Jasjit Singh, ACC, Calcutta and Others, 1964 (2) TMI 1 - SUPREME COURT holding that guilty mind is not an essential constituent of Section 52A which absolutely prohibits entry of vessels in which there is any construction, adaptation, alteration or filting made for the purpose of concealing goods. Following the ratio of the above decisions, we answer the issue referred, by holding that mens rea is not an essential ingredient to warrant confiscation and penalty under the provisions of Rule 173Q(1)(a),(b) (c) of the Central Excise Rules, 1944. The papers are now returned to the referral Bench for disposal of the appeals in the light of the above.
Issues Involved:
1. Whether mens rea is required for warranting confiscation and penalty under Rule 173Q(1)(a), (b) & (c) of the Central Excise Rules, 1944. Issue-Wise Detailed Analysis: 1. Mens Rea Requirement for Confiscation and Penalty Under Rule 173Q(1)(a), (b) & (c): The primary issue referred to the Larger Bench was whether mens rea (guilty mind) is necessary for confiscation and penalty under the provisions of Rule 173Q(1)(a), (b) & (c) of the Central Excise Rules, 1944. Facts and Background: - In Appeal No. E/1556/04, Central Excise officers found 299 bundles of copper products ready for dispatch but not recorded in the daily stock account. Additionally, duty-paid raw materials were removed without proper documentation. - In Appeal No. E/1558/04, officers seized unaccounted stock of finished goods. Show cause notices were issued, leading to adjudications imposing penalties and confiscations, which were later challenged in appeals. Legal Provisions and Interpretations: - Rule 173Q specifies conditions under which goods are liable to confiscation and penalties can be imposed. Clauses (a), (b), and (c) do not explicitly mention "intent to evade duty," unlike clause (d). - The language of Rule 173Q(1)(a), (b), and (c) suggests that knowledge is inherent in the commission or omission of the acts specified, implying that mens rea is not necessary. Judicial Precedents: - Kirloskar Brothers Ltd. v. UOI: The Bombay High Court held that liability under Rule 173Q(1)(a), (b), and (c) does not depend on mens rea. - Nizam Sugar Factory Ltd. v. CCE: The Andhra Pradesh High Court ruled that mens rea is not a relevant ingredient for liability under Rule 173Q(1)(a), emphasizing the importance of safeguarding excise revenue and the absolute liability created by the rule. - Gujarat Travancore Agency v. CIT: The Supreme Court held that unless explicitly required by statute, proving mens rea is not necessary for imposing penalties. - Indo-China Steam Navigation Co. Ltd. v. Jasjit Singh: The Supreme Court stated that guilty mind is not essential for certain statutory prohibitions aimed at preventing smuggling and protecting economic interests. Conclusion: - The Larger Bench concluded that mens rea is not an essential ingredient for warranting confiscation and penalty under Rule 173Q(1)(a), (b) & (c) of the Central Excise Rules, 1944. This interpretation aligns with the statutory language and judicial precedents emphasizing absolute liability for specific regulatory violations. Disposition: - The papers were returned to the referral Bench for disposal of the appeals in light of the above findings. (Pronounced in Court on 12-7-2006)
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