2001 (2) TMI 166 - AT - Central Excise

Summary

Issues involved:
Appeal regarding liability for confiscation and penalty under Rule 173Q of the CER for unaccounted goods in the factory.

Analysis:
The appeals involved a crucial issue of whether goods lying in the factory but not accounted for in RG 1 are liable for confiscation and penalty under Rule 173Q of the Central Excise Rules (CER). The appellants argued that the failure to enter fully manufactured goods in the RG 1 register was not with the intention to evade duty, citing precedents and emphasizing the necessity of mens rea for penal action under Rule 173Q. The Member (J) analyzed the provisions of Rule 173Q and Rule 226, highlighting that penal action under 173Q requires contravention related to removal of goods or intent to evade duty, which was not established in this case. The Member (J) concluded that mere non-maintenance of accounts does not warrant penal action under Rule 173Q, instead, imposing a penalty under Rule 226 for such failure. The judgment stressed the need for strict interpretation of penal provisions and favored the appellants, setting aside the order of confiscation and penalty under Rule 173Q but imposing a penalty of Rs. 2,000 under Rule 226 due to the failure in maintaining proper books of account.

The judgment further addressed the conflict between Rule 173Q and Rule 226, emphasizing that the absence of mens rea in not accounting for goods in the RG 1 register is a minor offense warranting a penalty under Rule 226 rather than confiscation and penalty under Rule 173Q. The Member (J) concurred with the view that a penalty of Rs. 2,000 for non-accounting in RG 1 sufficed in the absence of intent to evade duty. The judgment referenced precedents and the necessity of establishing the responsible party for non-accounting, setting aside penalties imposed on certain individuals due to lack of evidence showing their involvement in the un-accounting of goods.

The Tribunal, after careful consideration, upheld the arguments presented by the appellants, citing the absence of evidence indicating an attempt to clear goods without payment of duty. Referring to previous decisions and the gravity of the offense, the Tribunal concluded that the goods were not liable for confiscation and thus, redemption fine was set aside. The penalty imposed on the appellants was reduced to Rs. 25,000 from Rs. 1 lakh, and penalties on other individuals were set aside due to insufficient evidence of their involvement in the un-accounting of goods. The judgment emphasized the importance of considering the facts and circumstances of each case in determining the quantum of penalty, aligning with the principle that penalty should not be imposed merely for revenue generation.