Mens rea is required for confiscation and penalty where the confiscatory rule demands culpable intent; mere non-accountal is insufficient.

Confiscation and penalty for excess finished goods and duty-paid raw materials could not be sustained on the facts found because the record did not establish deliberate suppression or intent to remove goods clandestinely. For finished goods, the confiscatory language in Rule 173Q(1)(d) was read as requiring mens rea, and the Revenue's cited decisions did not displace that requirement. For duty-paid raw materials, Rule 25 of the Central Excise (No. 2) Rules, 2001 was treated as pari materia with the earlier confiscation provision, so confiscation or penalty could not follow a mere allegation of non-accountal without culpable intent. The appeals were allowed and the impugned orders were set aside.

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Issues: Whether confiscation of excess finished goods and duty-paid raw materials, and the connected penalties, could be sustained in the absence of mens rea.

Analysis: The excess stock was found in the context of alleged non-accountal, but the record did not show any finding of deliberate suppression or intent to remove the goods clandestinely. For finished goods, the reasoning applied to clause (d) of Rule 173Q(1) required mens rea for confiscation and penalty, and the earlier decisions relied upon by the Revenue did not displace that requirement for the relevant clause. For raw materials, the same approach was applied by treating Rule 25 of the Central Excise (No. 2) Rules, 2001 as pari materia with the earlier confiscation provision, and duty-paid raw materials were held not to attract confiscation or penalty on the facts found.

Conclusion: The confiscation and penalties were not sustainable, both for the finished goods and for the raw materials.

Final Conclusion: The appeals were allowed and the impugned orders were set aside.

Ratio Decidendi: Confiscation and penalty for non-accountal of excisable goods under the relevant confiscatory rules require proof of the necessary culpable intent where the rule so demands, and duty-paid raw materials cannot be confiscated on a mere allegation of clandestine removal without such basis.

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