Penalty for not filing classification list on fully exempt goods was set aside absent revenue loss or deliberate defiance.

Penalty under Rule 173Q for failure to file a classification list for fully exempt goods was found unsustainable where the assessee had filed the list immediately after the omission was pointed out. The record showed no revenue loss, no contumacious conduct, and no deliberate defiance of law. Penalty proceedings were treated as quasi-criminal in nature, and although mens rea may not be required in every case, penalty is not ordinarily justified without conscious disregard of duty or dishonest conduct. On these facts, the ingredients for penalty were absent, and the penalty was set aside.

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Issues: Whether penalty under Rule 173Q of the Central Excise Rules was sustainable for failure to file a classification list in respect of fully exempt goods.

Analysis: The goods in question were fully exempt under Notification No. 319/86-C.E. and the assessee filed the classification list immediately after the requirement was pointed out. The record disclosed no revenue loss, no contumacious conduct, and no deliberate defiance of law. Penalty proceedings of this kind are quasi-criminal in nature, and while mens rea may not be a necessary ingredient in every case, penalty is not ordinarily warranted absent conscious disregard of duty or dishonest conduct. On the facts, those ingredients were absent.

Conclusion: The penalty was not justified and was set aside in favour of the assessee.

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