2000 (11) TMI 986 - AT - Central Excise

Summary

Issues Involved:
1. Imposability of penalty under Rule 173Q(1) of the Central Excise Rules, 1944.
2. Bona fide belief regarding the excisability of printed cartons.
3. Applicability of mens rea for imposing penalty.
4. Quantum of penalty.

Detailed Analysis:

1. Imposability of Penalty under Rule 173Q(1):
The primary issue in this appeal is whether M/s. R.S. Graphics is liable for a penalty under Rule 173Q(1) of the Central Excise Rules, 1944. The appellants had cleared printed cartons without following Central Excise procedures and without paying duty, under the belief that the cartons were not excisable. The Department argued that the appellants were aware of their duty liability and had paid the duty for the past five years only after being intimated by the Department. The Tribunal noted that Rule 173Q(1)(a), (b), and (c) do not require mens rea for imposing a penalty, unlike Rule 173Q(1)(d), which requires an intention to evade duty. Since the appellants did not take registration, did not account for the goods, and cleared them without paying duty, they were found liable for a penalty.

2. Bona Fide Belief Regarding Excisability:
The appellants argued that they operated under a bona fide belief that printed cartons were not excisable, supported by conflicting judicial decisions. They cited various cases, including the Andhra Pradesh High Court's decision in Golden Press v. Deputy Collector and the Supreme Court's decision in Hindustan Steel Ltd. v. State of Orissa, which suggested that penalty should not be imposed where there is a bona fide belief and no deliberate defiance of the law. The Tribunal acknowledged these arguments but noted that the appellants did not show any correspondence with the Department regarding the excisability of their product, indicating a clear omission on their part.

3. Applicability of Mens Rea:
The Tribunal discussed whether mens rea (guilty intention) is necessary for imposing a penalty under Rule 173Q(1). It was concluded that mens rea is not required for sub-clauses (a), (b), and (c) of Rule 173Q(1), which deal with removing excisable goods in contravention of the rules, not accounting for excisable goods, and not taking registration. The Tribunal referenced several cases, including Reliance Industries v. C.C.E. and Reckitt Colman of India Ltd. v. C.C.E., which supported the view that a penalty can be imposed for statutory violations without requiring proof of mens rea.

4. Quantum of Penalty:
The Tribunal considered the facts and circumstances of the case to determine the appropriate quantum of penalty. Initially, a penalty of Rs. 3 lakhs was imposed by the Commissioner. However, considering the appellants' immediate compliance and payment of duty upon being informed by the Department, the Tribunal reduced the penalty to Rs. 50,000/-. It was noted that the penalty should be proportionate to the violation and the circumstances, including the appellants' corrective actions and the lack of prior notice from the Department.

Separate Judgments:
Majority View:
The majority concluded that no penalty should be imposed given the bona fide belief and the immediate corrective actions taken by the appellants. The final order set aside the penalty, and the appeal was allowed.

Dissenting Opinion:
One member disagreed, arguing that the penalty should be reduced to Rs. 50,000/- instead of being completely waived. This member emphasized that the appellants' failure to follow procedures and their subsequent compliance did not absolve them of liability for a penalty.

Final Order:
In light of the majority view, the impugned order was set aside, and the appeal was allowed, resulting in no penalty being imposed on M/s. R.S. Graphics.