Referability of tax questions and mens rea under Central Excise penalty rules: only two issues were referred to the High Court.

Questions framed as arguments or dependent on the factual record were treated as non-referable under Section 35G, so proposed issues on the interaction of Rule 173G with other provisions and on the nature of the goods were rejected as questions of fact or as disclosing no conflict requiring reference. The Tribunal identified two surviving questions of law for reference: whether mens rea is necessary for an offence under Rule 173Q(1)(b), and whether that rule was correctly applied to goods found in the production hall of the factory.

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Issues: Whether the proposed questions raised in the reference application were referable to the High Court under Section 35G of the Central Excises and Salt Act, 1944, and whether the Tribunal was correct in holding that mens rea is not a necessary ingredient for an offence under Rule 173Q(1)(b) of the Central Excise Rules, 1944 and in applying that rule to goods found in the production hall of the factory.

Analysis: The proposed questions concerning the interaction of Rule 173G with the other provisions of the Act and the Rules were declined as they did not disclose any conflict requiring reference. Questions framed as arguments were not treated as referable questions of law. Questions turning on the material on record and the nature of the goods were treated as questions of fact and were therefore not referred. The Tribunal, however, identified two surviving questions of law for reference: whether mens rea is necessary for an offence under Rule 173Q(1)(b), and whether that provision was correctly applied on the facts found, particularly in relation to the presence of the goods in the production hall.

Conclusion: Only the two identified questions were referred to the High Court, and the remaining proposed questions were rejected as non-referable.

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