2003 (9) TMI 622 - AT - Central Excise

Tribunal Upholds Confiscation & Penalties for Unaccounted Fabrics - Rule 173Q Applied

The Tribunal upheld the confiscation of unaccounted processed cotton fabrics and grey cotton fabrics, along with the redemption fine and penalty imposed ... Confiscation of unaccounted excisable goods - penalty for non-accountal under Rule 173Q - mens rea not required for imposition of penalty or fine under Rule 173Q - judicial reduction of redemption fine and penalty in exercise of discretionConfiscation of unaccounted excisable goods - penalty for non-accountal under Rule 173Q - mens rea not required for imposition of penalty or fine under Rule 173Q - Validity of confiscation of the seized fabrics and imposition of penalty under Rule 173Q in view of the Panchnama and admissions recorded on the date of seizure. - HELD THAT: - The Tribunal found on the material on record, notably the Panchnama dated 6-9-99, that RG-1 was maintained only up to August 1999 and no lot-wise register was being kept; the Panchnama recorded seizure of processed and grey cotton fabrics not accounted for. The appellants did not challenge the Panchnama, retract the statement of their partner recorded at the time, or produce evidence to establish that the goods were incompletely processed and hence not required to be entered. Rule 173Q(1) of the Central Excise Rules provides for confiscation and imposition of penalty where a manufacturer does not account for excisable goods produced or stored by him. Reliance on judicial authority establishing that mens rea is not a prerequisite for liability under relevant clauses of Rule 173Q informed the conclusion that absence of intent does not negate confiscation or penalty. Applying these principles to the admitted facts and the Panchnama, the Tribunal upheld the confiscation and the levy of penalty and redemption fine. [Paras 3]Confiscation of the unaccounted fabrics and imposition of penalty under Rule 173Q are upheld.Judicial reduction of redemption fine and penalty in exercise of discretion - Appropriateness and quantum of the redemption fine and penalty imposed. - HELD THAT: - While upholding liability, the Tribunal exercised its discretionary power to moderate the financial consequences after considering the facts, the appellant's submissions about the relatively small duty involved, and the overall circumstances. The Tribunal concluded that the originally imposed redemption fine and penalty were excessive in view of the duty involved and fairness of outcome, and therefore reduced the penalty and redemption fine to amounts specified in the order. [Paras 3]Penalty reduced to Rs. 5,000 and redemption fine reduced to Rs. 10,000.Final Conclusion: The Tribunal upheld confiscation and liability to penalty under Rule 173Q based on the Panchnama and admissions on record, rejecting the absence of mens rea as a defence, but in exercise of discretion reduced the penalty and redemption fine to specified lower amounts. Issues:- Appeal against Order-in-Appeal confirming redemption fine and penalty- Confiscation of unaccounted processed cotton fabrics and grey cotton fabrics- Arguments regarding non-accountal of finished goods and absence of mens rea- Applicability of Rule 173Q of Central Excise Rules- Decision on redemption fine and penalty amountsAnalysis:The appeal was filed against Order-in-Appeal confirming redemption fine and penalty imposed on M/s. Delhi Dyeing Mills for unaccounted processed cotton fabrics and grey cotton fabrics. The appellant argued that the seized fabrics were not fully processed and were not entered in the statutory records, emphasizing that non-accountal of finished goods does not automatically lead to confiscation. They also contended that the redemption fine and penalty amounts were excessive compared to the duty involved.In response, the Departmental Representative cited the statement of the partner admitting the unaccounted fabrics and non-maintenance of records, asserting that the goods were liable for confiscation under Rule 173Q of the Central Excise Rules. The representative relied on previous tribunal decisions and a Bombay High Court ruling stating that mens rea is not essential for imposing penalties under the rule.Upon review, the Tribunal noted that the appellant did not challenge the Panchnama or provide evidence to refute the partner's statement. The Tribunal found no merit in the argument that the fabrics were not fully processed or that lot-wise registers were maintained. Rule 173Q was invoked, allowing for confiscation and penalties for unaccounted goods, with the absence of mens rea not affecting the confiscation. The Tribunal referenced a Supreme Court ruling to support this interpretation.Ultimately, the Tribunal upheld the confiscation of goods, along with the redemption fine and penalty. However, considering the circumstances and duty involved, the Tribunal agreed to reduce the penalty to Rs. 5,000 and the redemption fine to Rs. 10,000, deeming the initial amounts excessive. This decision aimed to balance justice with the penalty amounts imposed.