Mandatory excise record-keeping breach may attract penalty, but quantum must reflect whether the omission was wilful or merely a lapse.

Non-entry of finished goods in the RG-1 register constitutes a breach of mandatory excise record-keeping and can attract penalty under Rule 173Q of the Central Excise Rules, 1944. The majority view accepted that a penalty was justified in principle, but held that its quantum must reflect the surrounding facts, including maintenance of the production register, the short absence of the concerned employee, and the absence of clear wilful evasion. On that basis, the original penalty was reduced, with the breach treated as a lesser lapse rather than a fully deliberate omission.

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Issues: Whether, on the facts of non-accountal of finished goods in the RG-1 register, the personal penalty imposed under Rule 173Q of the Central Excise Rules, 1944 was required to be sustained in full or reduced.

Analysis: The majority view held that non-entry of production in the RG-1 register constituted a breach of statutory obligation attracting penalty. At the same time, the facts showed that the production register had been maintained, the omission was linked to the absence of the concerned employee for a short period, and the explanation, taken with the overall record, justified a lenient view on the amount of penalty. The contrary view treated the omission as deliberate and relied on the manager's statement to uphold the original penalty, but the majority found the circumstances insufficient to sustain the higher amount.

Conclusion: The penalty was upheld in principle, but reduced from Rs. 20,000/- to Rs. 2,000/-, and the assessee succeeded to that extent.

Ratio Decidendi: A breach of mandatory excise record-keeping may attract penalty under Rule 173Q, but the quantum must reflect the surrounding facts and circumstances, including whether the omission was a wilful attempt to evade duty or a lesser lapse.

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