Mens rea not required for Rule 173Q penalty; confiscation stayed undisturbed while penalty was enhanced.

Non-accountal of goods in the RG-1 register did not by itself justify confiscation where the goods were reflected in other records, and the lenient view declining confiscation was sustained. For penalty under Rule 173Q of the Central Excise Rules, 1944, mens rea was not an essential ingredient for confiscation or penalty under clauses (a), (b) and (c). The lower appellate reduction of penalty on the mistaken premise that mens rea was required was therefore corrected, and the penalty was enhanced on the facts of the case. The decision on confiscation remained undisturbed.

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Issues: (i) Whether non-accountal of goods in the RG-1 register, when the goods were recorded in other records, justified confiscation. (ii) Whether penalty under Rule 173Q of the Central Excise Rules, 1944 required proof of mens rea and whether the reduced penalties called for enhancement.

Issue (i): Whether non-accountal of goods in the RG-1 register, when the goods were recorded in other records, justified confiscation.

Analysis: The goods were found not entered in the RG-1 register, but they were reflected in other records maintained by the respondents. On that factual basis, the lower appellate authority adopted a lenient approach and declined confiscation.

Conclusion: Confiscation was not interfered with and the finding in favour of the respondents on this issue was sustained.

Issue (ii): Whether penalty under Rule 173Q of the Central Excise Rules, 1944 required proof of mens rea and whether the reduced penalties called for enhancement.

Analysis: The Larger Bench had already held that mens rea is not an essential ingredient for confiscation and penalty under Rule 173Q(1)(a), (b) and (c). The reduction of penalty by the lower appellate authority was based on an incorrect assumption that mens rea was necessary. In view of that error, the penalty required redetermination on the facts of the case.

Conclusion: The penalties were enhanced, and this issue was decided in favour of the Revenue.

Final Conclusion: The appeals succeeded only to the extent of enhancement of penalty, while the decision not to order confiscation remained undisturbed.

Ratio Decidendi: Mens rea is not a necessary ingredient for confiscation or penalty under Rule 173Q(1)(a), (b) and (c) of the Central Excise Rules, 1944, though the quantum of penalty may still be determined on the facts of the case.

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