1986 (8) TMI 311 - AT - Central Excise

Imposition of penalty and appropriation of security deposit towards fine in lieu of confiscation of goods quashable

Summary

Issues:
- Appeal against levy of penalty and appropriation of bond towards fine under Rule 173Q of the Central Excises Rules, 1944.
- Contravention of Rule 53 read with Rule 173G regarding maintenance of production records.
- Justification of penalty under Rule 173Q for contravention of Rule 173G.
- Compliance with ISI standards for marketability of goods.
- Applicability of penalty under Rule 173Q without criminal intention.
- Adverse inference for unaccounted goods not entered in the R.G.I. account.
- Examination of submissions regarding marketability of goods and maintenance of production records.

Analysis:

The case involves an appeal by M/s. Afco Industrial and Chemicals Ltd. against the levy of a penalty and appropriation of bond towards a fine under Rule 173Q of the Central Excises Rules, 1944. The appellants argued that the goods seized were not marketable due to being affected by weather and required further processing to meet ISI standards. They contended that the goods were packed in polythene bags to prevent damage from moisture before re-processing. The advocate highlighted that the goods were not fully finished and did not meet ISI requirements, justifying their non-entry in the R.G.I. register. The appellants emphasized that there was no intention to evade duty and cited relevant standards and test results to support their claim.

The Collector, on the other hand, argued that the appellants contravened Rule 53 and Rule 173G by failing to maintain accurate production records. He asserted that the penalty under Rule 173Q was justified for this violation. The Collector supported his argument by stating that the goods were not entered in the R.G.I. account, potentially allowing them to be removed without duty payment. He referenced previous judgments and contended that penal action was warranted even without criminal intent.

After examining both sides' submissions, the judge found merit in the appellants' argument. The judge noted that the goods were not in a marketable condition and did not meet ISI standards, as supported by the chemical test report. The judge emphasized that the goods were packed in polythene bags to prevent moisture damage before processing, indicating they were not fully manufactured. Considering the circumstances and the lack of offense on the appellants' part, the judge set aside the Collector's order of penalty and appropriation of the security deposit towards the fine. The appeal by M/s. Afco Industrial and Chemicals Ltd. was allowed accordingly.