1989 (5) TMI 184 - AT - Central Excise

Summary

Issues:
- Imposition of penalty for irregularities in maintaining Central Excise records and non-accountal of rejected goods.

Detailed Analysis:
The case involved M/s. Hindustan Lever Ltd. appealing against a penalty imposed by the Collector of Central Excise, Chandigarh for alleged irregularities in not maintaining Central Excise records properly and non-accountal of rejected goods. The facts revealed that during a surprise visit, 571 CB boxes of 'Rexona' soap were found in the factory premises, which were explained by the appellant as rejected due to poor quality during production. The appellant replaced these boxes with new ones, leading to discrepancies in the records. The Assistant Collector issued a show cause notice for confiscation of goods and imposition of penalty. The appellants defended themselves by stating that the replacement was done in good faith without intent to evade duty. The Additional Collector accepted the explanation but imposed a penalty of Rs. 20,000 for irregularities in record-keeping.

The appellant challenged the penalty, arguing that the employees' technical lapse due to lack of experience should not warrant such a severe penalty. They cited legal precedents to support their contention, emphasizing that penalty should not be imposed for technical breaches or where there is a genuine belief of compliance. The Departmental Representative, however, supported the penalty as a deterrent for maintaining proper records, asserting that mens rea was not necessary for imposing penalties for non-performance of duties. The central issue was whether the Additional Collector was justified in imposing a severe penalty solely based on irregularities in record-keeping and non-accountal of rejected goods.

Referring to legal precedents, including Hindustan Steel Ltd. v. State of Orissa, the Tribunal highlighted that penalties should not be imposed for technical breaches or where there is a bona fide belief of compliance. The Tribunal noted that the appellants had adequately explained the circumstances, and the mistake appeared to be technical. Consequently, the penalty was deemed harsh and severe, leading to the Tribunal allowing the appeal and directing the Revenue to refund the penalty amount, if paid, within two months.

In conclusion, the Tribunal's decision focused on the principle that penalties should be imposed judiciously, considering all relevant circumstances, and not for technical breaches or genuine belief of compliance. The case underscored the importance of maintaining proper records while emphasizing that penalties should be proportional and not unduly punitive for minor lapses.