Proportionality in excise penalties: a technical breach without mens rea justified reduction of penalty and setting aside of fines.

A technical breach of Rule 224 of the Central Excise Rules, 1944, arising from removal of excisable goods after 18.00 hours on the pre-budget day without prior permission, did not justify a heavy penal consequence where the goods were covered by valid documents and records were in order. In the absence of evidence of deliberate evasion or mens rea, the penalty imposed under Rule 173Q was found disproportionate when compared with the lower penalty contemplated for the violation. The redemption fine on the goods and the fine for release of the truck were also found excessive, and the penalty was reduced while the fines were set aside.

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Issues: Whether, for a technical breach of Rule 224 of the Central Excise Rules, 1944, the penalty and redemption fines imposed were excessive and liable to be reduced.

Analysis: The breach consisted only of removal of excisable goods after 18.00 hours on the pre-budget day without prior permission. The goods were otherwise covered by valid documents and the records were in order. There was no material to show deliberate evasion of duty or any mens rea. In such circumstances, the imposition of a penalty of Rs. 1,00,000 under Rule 173Q, when the lower penalty contemplated for the violation was Rs. 2,000 under Rule 223B, was held to be disproportionate. The redemption fine on the goods and the fine for release of the truck were also found to be excessive.

Conclusion: The penalty was reduced to Rs. 2,000 and the redemption fines were set aside, in favour of the assessee.

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