1991 (6) TMI 171 - AT - Central Excise

Summary

Issues:
1. Imposition of personal penalty and confiscation of goods under Rule 173Q of the Central Excise Rules, 1944.
2. Allegation of contravention of Rule 53 and Rule 226 read with Rule 173G(4) of the Central Excise Rules, 1944.
3. Interpretation of provisions of Rule 173Q regarding intention to remove goods without payment of duty.
4. Requirement of mens rea in imposing penalty and ordering confiscation.
5. Compliance with statutory obligations and consequences of non-compliance.

Detailed Analysis:

1. The appeal challenged an Order imposing a personal penalty and ordering confiscation of excess goods under Rule 173Q of the Central Excise Rules, 1944. The appellant's factory was visited by Central Excise officers who found excess stock of Decorative Laminated sheets not recorded in the RG-1 register. The appellant claimed the goods were not in saleable condition as they were not fully manufactured and were kept in a Bonded Store Room. The show cause notice alleged contravention of Rule 53 and Rule 226. The appellant argued against the penalty and confiscation, citing lack of mens rea and improper reasoning in the adjudicating authority's order.

2. The appellant contended that the goods were not fully manufactured and thus were not required to be entered in the RG-1 register at that stage. They argued that the provisions of Rule 173Q required an intention to remove goods without payment of duty, which was not alleged in the show cause notice. The appellant emphasized the necessity of establishing mens rea for imposing penalties, citing relevant legal precedents. They also criticized the adjudicating authority's order for not considering their explanations and for misinterpreting the nature of the goods stored in the Bonded Store Room.

3. The Respondent supported the order, stating that the factual findings were undisputed, and the appellant's defense centered on legal points regarding the application of Rule 173Q. They argued that strict compliance with the rule provisions was necessary, regardless of intention, and that the order was justified. The Respondent maintained that the provisions of Rule 173Q were clear and unambiguous, and non-compliance should result in penal consequences.

4. The Tribunal found that the goods were indeed in a manufactured condition but were not entered in the RG-1 register as required by law. The appellant's argument that the goods were semi-finished and needed further processing before entry was rejected. The Tribunal emphasized that the entry in the RG-1 register should occur after the manufacturing process, and storing goods in the Bonded Store Room indicated they were fully manufactured. The Tribunal also addressed the argument regarding mens rea, stating that while intention could be a factor, statutory obligations must be complied with, and a bona fide lapse does not absolve the party from liability.

5. Ultimately, the Tribunal upheld the order, finding clear non-compliance with Rule 173Q(1)(b) regarding the entry of manufactured goods in the RG-1 register. The Tribunal noted that even if the intention to evade duty was not proven, non-compliance with the rule warranted confiscation of goods and imposition of penalties. The show cause notice had alleged non-compliance, and the Tribunal found the order of confiscation and penalty to be justified based on the established facts. The Tribunal saw no grounds to interfere with the quantum of fine and penalty imposed, leading to the rejection of the appeal.