Penalty under excise rules for unregistered removal of printed cartons upheld, with bona fide belief relevant only to quantum.

Rule 173Q(1) of the Central Excise Rules, 1944 was examined in relation to removal of printed cartons without registration, prescribed records, or duty compliance. The majority view was that clauses (a), (b) and (c) create penalty liability for contraventions of the excise rules and do not require proof of mens rea as a statutory condition; on the admitted facts, the contravention was established, although bona fide belief and later duty payment were relevant only to quantum, so the penalty was reduced to a nominal amount. The dissent considered the excisability controversy and conflicting case law sufficient to support bona fide belief and would have deleted the penalty entirely.

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Issues: Whether penalty under Rule 173Q(1) of the Central Excise Rules, 1944 was leviable for removal of printed cartons without registration and without following excise procedure, and whether the assessees' bona fide belief and prompt payment of duty excluded penalty.

Analysis: The majority held that clauses (a), (b) and (c) of Rule 173Q(1) cover removal of excisable goods in contravention of the rules, failure to account for goods, and carrying on manufacture without registration, and that these clauses do not make proof of mens rea a statutory requirement. On the facts, the appellants had neither registered nor maintained the prescribed records and had removed goods without duty payment, so the contravention was established. The majority further held that the pleas based on conflicting decisions on printed cartons, subsequent payment of duty, and cited authorities on bona fide belief did not displace liability to penalty, though they were relevant for quantum. The earlier authorities concerning mere technical breach and discretion in imposing penalty were distinguished on the facts.

Conclusion: Penalty was held leviable, but it was reduced to a nominal amount on the facts.

Dissenting Opinion: The dissent held that the controversy over the excisability of printed cartons and the existence of contrary judicial views supported a bona fide belief, that the show cause notice did not sustain the case for penalty on the pleaded basis, and that in the absence of deliberate evasion or proved mala fides no penalty was warranted. The dissent would have set aside the penalty in full.

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