Non-accounting of excisable goods triggers confiscation and strict-liability penalty, but intent to evade duty must be separately proved.

Failure to enter excisable goods in the prescribed stock account constituted non-accounting under the Central Excise record-keeping rules and exposed the goods to confiscation, even where they were found in the working hall and outside the approved store-room. Rule 173Q(1)(b) was treated as a strict liability provision for accounting breaches, so mens rea was not required. By contrast, Rule 173Q(1)(d) applied only where intent to evade duty was affirmatively proved, and that ingredient was not established on the facts. The confiscation and penalty were therefore sustained only to a limited extent, with relief granted for the balance.

---

---

Issues: (i) Whether excisable goods found in the working hall and not entered in the prescribed stock account were liable to confiscation under the Central Excise Rules, and whether the invocation of Rules 53, 173G(4), 226 and 173Q(1)(b) was justified. (ii) Whether mens rea was necessary for penalty under Rule 173Q(1)(b) and whether the ingredients of Rule 173Q(1)(d), namely intent to evade payment of duty, were established.

Issue (i): Whether excisable goods found in the working hall and not entered in the prescribed stock account were liable to confiscation under the Central Excise Rules, and whether the invocation of Rules 53, 173G(4), 226 and 173Q(1)(b) was justified.

Analysis: The prescribed R.G.1-E.B.4 record was treated as a combined account covering manufacture, storage and delivery. Rule 53 and Rule 173G(4) occupied the same field so far as accounting for excisable goods was concerned, and no conflict existed so as to exclude either provision. Goods kept outside the approved store-room and not entered in the prescribed register were held to be not duly accounted for in the manner required by the rules. Non-compliance with Rule 226, which requires true and timely entries in the stock account, independently attracted confiscation. The Court also held that the contention that the goods were not fully manufactured merely because serial numbering was absent was not acceptable.

Conclusion: The goods covered by the identified serial numbers were liable to confiscation, and the finding that the relevant rules were wrongly invoked was set aside in part.

Issue (ii): Whether mens rea was necessary for penalty under Rule 173Q(1)(b) and whether the ingredients of Rule 173Q(1)(d), namely intent to evade payment of duty, were established.

Analysis: Rule 173Q(1)(b) was construed as a strict obligation concerning accounting of excisable goods, so guilty knowledge was not essential for liability under that clause. In contrast, Rule 173Q(1)(d) expressly required intent to evade duty. On the facts, the circumstances showed irregular accounting and improper storage, but they did not establish with sufficient certainty a deliberate intent to evade payment of duty. The penalty could therefore stand only to the extent referable to Rule 173Q(1)(b).

Conclusion: Mens rea was not required for liability under Rule 173Q(1)(b), but the ingredient of intent to evade under Rule 173Q(1)(d) was not proved; the penalty was sustained only in part.

Final Conclusion: The appellate order was interfered with, the confiscation and penalty were upheld only to a limited extent, and the remaining relief was granted by excluding the goods for which packing was not conclusively established and by reducing the penalty.

Ratio Decidendi: Failure to enter excisable goods in the prescribed stock account constitutes non-accounting and violation of the record-keeping rules, attracting confiscation and penalty under Rule 173Q(1)(b) without proof of mens rea, whereas Rule 173Q(1)(d) can operate only where intent to evade payment of duty is affirmatively established.

---