Mens rea requirement for clandestine removal penalties: confiscation under Rule 173Q(1)(d) failed for lack of intent proof.

Confiscation and penalty for alleged clandestine removal were unsustainable where the authority failed to record any finding of clandestine intent. The distinction between Rule 173Q(1)(b) and Rule 173Q(1)(d) was material: non-accountal of finished excisable goods under clause (b) did not require mens rea, but clause (d) applied only where clandestine removal was alleged and proof of intent was available. On the facts stated, the goods were said to be awaiting transfer to the bonded store room for RG-1 accounting, and the requisite proof of mens rea was absent. The order setting aside confiscation and penalty under Rule 173Q(1)(d) was therefore upheld, while the limited penalty under Rule 226 remained undisturbed.

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Issues: Whether confiscation and penalty for non-accountal of finished excisable goods were sustainable in the absence of proof of clandestine intent or mens rea.

Analysis: The finished goods were found in the finishing room and the department alleged that they were kept there with intent to remove them clandestinely without payment of duty. The assessee denied that allegation and maintained that the goods were awaiting transfer to the bonded store room for accounting in RG-1. The adjudicating authority did not record any finding that the goods were retained with clandestine intent. The distinction between clause (b) and clause (d) of Rule 173Q(1) was material: clause (b) covered non-accountal of finished excisable goods and did not require mens rea, while clause (d) applied where clandestine removal was alleged and required proof of mens rea. On the facts found, the necessary proof of intent was absent.

Conclusion: The confiscation and penalty under Rule 173Q(1)(d) were unsustainable for want of proof of mens rea, and the lower appellate order setting them aside was upheld. The limited penalty sustained under Rule 226 was also left undisturbed.

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