Mens rea is essential for penalty under central excise non-accountal rules; mere RG 1 omission does not justify confiscation.

Rule 173Q of the Central Excise Rules, 1944 was treated as a penal provision requiring contravention accompanied by intent to evade duty. Mere non-accountal of goods in RG 1, without evidence of clandestine removal, preparation for removal, or an attempt to clear goods without payment of duty, was insufficient to sustain confiscation or redemption fine. Applying the Larger Bench view that mens rea is essential, the article notes that simple non-accountal may attract only a limited penalty. Where no material linked the other persons to the non-accountal, personal penalties on them were not justified and were deleted.

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Issues: Whether goods lying in the factory and not entered in RG 1 were liable to confiscation and redemption fine under Rule 173Q of the Central Excise Rules, 1944 in the absence of evidence of intent to evade duty, and whether the personal penalties on the connected persons were sustainable.

Analysis: Rule 173Q was treated as a penal provision requiring a contravention coupled with intent to evade duty. Mere non-accountal in RG 1, without evidence of clandestine removal, preparation for removal, or any attempt to clear the goods without payment of duty, was held insufficient to justify confiscation or redemption fine. The reasoning followed the Larger Bench view that mens rea is essential for invoking the penal clause, and that in cases of simple non-accountal without such intention, the matter at best attracted a limited penalty. On the facts, no material showed any role by the other persons in the non-accountal of goods, and no justification was found for fastening personal penalties on them.

Conclusion: Confiscation and redemption fine were set aside, the penalty on the company was reduced, and the personal penalties on the other noticees were deleted.

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