Absence of mens rea bars excise penalty where stolen goods were reported and duty liability was not disputed.

Penalty under Rule 173Q of the Central Excise Rules, 1944 read with Section 11AC was found unsustainable where the goods were claimed to have been stolen from the factory, an FIR had been lodged, duty liability was not disputed, and the record showed no intention to contravene excise law. In the absence of mens rea, the material did not justify penal action, and the penalty was set aside in favour of the assessee.

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Issues: Whether penalty was sustainable where the goods were claimed to have been stolen, the duty liability was not contested, and no mens rea was shown.

Analysis: The penalty had been imposed under Rule 173Q of the Central Excise Rules, 1944 read with Section 11AC of the Central Excise Act, 1944. The goods were stated to have been stolen from the factory and an FIR had been lodged. In these circumstances, and where the duty amount was not under challenge, the record did not disclose any intention to contravene the excise law. The absence of mens rea was decisive against the imposition of penalty.

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

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