1966 (9) TMI 40 - HC - Central Excise

Court emphasizes mens rea for liability in acquittal case under Rule 151

The court upheld the respondent's acquittal, emphasizing the necessity of proving mens rea for liability under Rule 151 and Sections 9(a) and 9(b) of the ... Penalty - Mens rea - Evasion of duty (Central Excise) Issues Involved:1. Liability under Section 9(a) and 9(b) of the Central Excises & Salt Act.2. Liability under Rule 151(c) of the Central Excise Rules, 1944.3. Interpretation of mens rea in the context of Rule 151.4. Vicarious liability for acts committed by employees.5. Applicability of Rule 225 to Rule 151.Detailed Analysis:1. Liability under Section 9(a) and 9(b) of the Central Excises & Salt Act:The prosecution argued that the respondent, a licensed tobacco dealer, had removed goods from his warehouse without adhering to the Central Excise Rules and without paying the duty levied on them, thereby contravening Section 9(a) and 9(b) of the Central Excises & Salt Act. The learned City Magistrate acquitted the respondent on the grounds that the prosecution failed to prove that the respondent was personally or through his servant liable for the shortages.2. Liability under Rule 151(c) of the Central Excise Rules, 1944:The prosecution contended that the respondent was liable under Rule 151(c) for removing goods from the warehouse otherwise than as provided by the rules. The City Magistrate, however, found that the prosecution did not establish the respondent's personal liability or that of his servant's actions, leading to the acquittal.3. Interpretation of mens rea in the context of Rule 151:The core issue was whether Rule 151 imposed absolute and unconditional liability on the owner of warehoused goods or required proof of mens rea. The judgment referred to the Supreme Court's decision in Nathoo Lal v. State of Madhya Pradesh, which established that mens rea is an essential ingredient of a criminal offense unless expressly or by necessary implication excluded by statute. The court found that Rule 151 did not expressly exclude mens rea, and its exclusion could not be implied as it was not absolutely clear that the object of the statute would be defeated otherwise.4. Vicarious liability for acts committed by employees:The prosecution argued that the respondent was vicariously liable for the acts of his servant, who allegedly committed the theft during the respondent's absence. The court, however, interpreted Rule 151 to mean that the owner could only be held liable for acts committed by employees if it was proven that these acts were done at the owner's behest, with his knowledge, or with his connivance. The court concluded that the prosecution failed to establish such proof, and therefore, the respondent could not be held vicariously liable.5. Applicability of Rule 225 to Rule 151:The State argued that Rule 225, which holds producers or manufacturers liable for the removal of goods by any person, should be applied to interpret Rule 151. The court rejected this argument, stating that applying Rule 225 would render the specific language of Rule 151 redundant. Rule 225 pertains to removals in violation of conditions laid down in Rule 224, which are distinct from those in Rule 151. Therefore, Rule 225 could not be used to interpret Rule 151.Conclusion:The court upheld the acquittal of the respondent on all counts. It held that mens rea was an essential ingredient for liability under Rule 151 and Section 9(a) and 9(b) of the Act. Since the prosecution failed to prove mens rea or the respondent's knowledge or connivance in the acts committed by his servant, the respondent was not criminally liable for the shortages or the evasion of duty. The appeal was dismissed.