Non-accountal without mens rea attracts only limited excise penalty, not harsher action for clandestine removal.

Non-entry of excisable goods in the RG-I register, without evidence of clandestine removal or mens rea, was treated as a minor accounting breach rather than a grave contravention warranting harsher penalty. The Tribunal held that where goods were physically found inside the factory and no preparation for secret removal was shown, the limited penalty for failure to make the required entry applied under Rule 226, not the enhanced penalty under Rule 173Q. The reduced penalty was therefore upheld and the departmental request for enhancement was rejected.

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Issues: Whether, on the facts of non-entry of excisable goods in the RG-I register without evidence of clandestine removal or mens rea, penalty was exigible under Rule 173Q or only the limited penalty contemplated by Rule 226 of the Central Excise Rules, 1944.

Analysis: The Tribunal noted that the goods were physically found inside the factory and there was no finding of any preparation to remove them clandestinely. It followed the view that non-accountal without mens rea constitutes a minor contravention, not attracting the harsher consequences under Rule 173Q. In such circumstances, the maximum penalty contemplated for failure to make the required entry was the limited penalty under Rule 226.

Conclusion: The departmental contention for enhancement of penalty under Rule 173Q was rejected, and the order limiting the penalty to Rs. 2,000 under Rule 226 was upheld in favour of the assessee.

Final Conclusion: The Tribunal sustained the Commissioner (Appeals)'s treatment of the matter as a case of non-accountal without mens rea and declined to interfere with the reduced penalty.

Ratio Decidendi: In the absence of mens rea and of any evidence of clandestine removal, non-accountal of excisable goods attracts only the limited penalty prescribed for breach of accounting requirements and does not justify harsher action under Rule 173Q.

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