TaxTMI 
TaxTMI 
2006 (7) TMI 238
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.... goods. Duty amount involved thereon was Rs. 1,90,338.80. It was also noticed that the assessee had removed duty paid raw materials viz. 17,482 kgs. of copper waste and scrap on which credit was taken, to their sister unit, i.e. Modisun Ltd., without preparing central excise invoice, without reversing Cenvat credit involved and without obtaining specific permission to store duty paid material in some other factory premises. Show case notice dated 17-8-2001 was, therefore, issued to the assessees, proposing to confiscate the seized finished goods and raw materials under Rule 173Q(1), to recover Central Excise Duty/Cenvat credit of Rs. 2,06,987/- leviable on raw materials cleared illicitly without payment of duty/without reversing Cenvat credit proposing levy of interest under the provisions of Section 11AB read with Rule 57AH and imposition of penalty under Section 11AC of the Central Excise Act read with Rule 173Q of the Rules. The Additional Commissioner of Central Excise adjudicated the notice by ordering confiscation of seized finished goods with option to redeem the same on payment of a fine of Rs. 2,00,000/-, ordered confiscation of seized raw materials with option to redeem t....
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....have heard both sides. 5. Rule 173Q reads as under :- "Rule 173Q. Confiscation and penalty - If any manufacturer, producer or licensee of a warehouse, - (a) removes any excisable goods in contravention of any of the provisions of these rules; or (b) does not account for any excisable goods manufactured, produced or stored by him; or (c) ------------ (d) contravenes any of the provisions of these rules with intent to evade payment of duty, then, all such goods shall be liable to confiscation and the manufacturer, producer, registered person of a warehouse or a registered dealer as the case may be, shall be liable for penalty not exceeding three times the value of the excisable goods in respect of which any contravention of the nature referred to in clause (a) or clause (b) or clause (bb) or clause (bbb) or clause (c) or clause (d) has been committed, or five thousand rupees, whichever is greater." Sub-clause (a) deals with the liability of a manufacturer if he removes any excisable goods in contravention of a....
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....anufactured goods to be entered into the statutory registers and provides for the storing of the manufactured goods in statutory godowns and prohibits the removal of those goods from the godown except on payment of the excise duty. However, in the case of those manufacturers who come under the scheme of self-removal, the excise goods are permitted to be removed by merely posting the necessary credit entries in the statutory books showing the excise duty payable to the Government. This is a scheme which depends for its operation on the honesty of the manufacturers. The Excise Rules, which provide for this scheme, must be interpreted in such a way as to ensure their usefulness and enforcement. If the presence of manufacturer's guilty mind is made by judicial process an essential ingredient of an act of violation of these rules, then the enforcement of these rules will largely become impossible. There is no textual warrant for such judicial interpretation. Rule 173Q says that if any manufacturer, purchaser or licensee of a warehouse removes any excisable goods in contravention of any of the provisions of the rules, such goods shall be liable to confiscation and also imposition of pena....
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....cise Act case. In our case it is not possible to conceive, though it may not be impossible to conjecture, that the removal of sugar would be without the knowledge or intent of the manufacturer. Secondly, we are here concerned with the enforcement of self-removal scheme, which operates on the basis of the honesty of the manufacturer of the excise goods. For these reasons, we do not think it appropriate to apply the rule of interpretation which Their Lordships of the Supreme Court had adopted in State of M.P. v. Azad Bharat Finance Co., AIR 1967 SC 276 supra in altogether a different context. In our opinion, the excise rules have created an absolute liability. 17. There is respectful authority for this view of ours. It is stated in Crawford Statutory Construction (Paragraph 275) that where a statute denounces as crimes acts mala prohibita (as distinct from criminal acts mala in se) such laws are either in the nature of police regulation or intended to protect the public or to promote the general welfare and that their enforcement does not call for the proof of a criminal intent unless the legislature so declares in apt words. The same author says :- "Although prima facie and ....
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....se of proceedings under Section 271(1)(a) which provides that a penalty may be imposed if the Income Tax Officer is satisfied that any person has without reasonable cause, failed to furnish the return of total income, the intention of the legislature is to emphasise the fact of loss to Revenue and to provide for a remedy for such loss, although no doubt an element of coercion is present in the penalty. The Court held that unless there is something in the language of the statute indicating the need to establish the element of mens rea it is generally sufficient to prove that a default in complying with the statute has occurred. The Apex Court held that there is nothing in Section 271(1)(a) requiring that mens rea must be proved before penalty can be levied under that provision contrasted with the provisions of Section 276C wherein the element of mens rea was required to be established before imposition of any sentence under that provision. Paragraph 4 of the judgment is reproduced below :- "Learned Counsel for the assessee has addressed an exhaustive argument before us on the question whether a penalty imposed under Section 271(1)(a) of the Act involves the element of mens rea and ....
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.... Section 271(1)(a) which requires that mens rea must be proved before penalty can be levied under that provision. We are supported by the statement in Corpus Juris Secundum, Volume 85, page 580, paragraph 1023 : "A penalty imposed for a tax delinquency is a civil obligation, remedial and coercive in its nature, and is far different from the penalty for a crime or a fine or forfeiture provided as punishment for the violation of criminal or penal laws." 8. Another judgment relevant in the context of necessity of the ingredient of mens rea is the Supreme Court's decision in the case of Indo-China Steam Navigation Co. Ltd. v. Jasjit Singh, ACC, Calcutta and Others, 1983 (13) E.L.T. 1392 (S.C.) holding that guilty mind is not an essential constituent of Section 52A which absolutely prohibits entry of vessels in which there is any construction, adaptation, alteration or filting made for the purpose of concealing goods. The relevant extracts are reproduced below :- "19. That takes us to the principal question as to the construction of S. 52A of the Act which has been elaborately argued before us by Mr. Sachin Choudhary. Section 52A provides that no vessel constructed, adapted, altered,....
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....words "knowingly or wilfully" are not used, we have the expression "concerned in", and that may introduce considerations of mens rea. Thus, where the legislature wanted to introduce the knowledge or intention actuating the commission of the offence as an essential element of the offence, it has used appropriate words to indicate that intention. The failure to use a similar word in S. 167(12A) cannot, therefore, be regarded as accidental, but must be held to be deliberate. In our opinion, there is some force in this argument as well. 23. Besides, there can be no doubt that in construing a section, it would be relevant for the Court to consider whether the construction for which Mr. Choudhary contends would not make the provisions of Section 52A read with S. 167(12A) substantially nugatory. If it appears that the adoption of the said construction would substantially defeat the very purpose and intention of the legislature in enacting the said section, that would be a legitimate reason for rejecting the said construction. If the words used in Section 52A are capable of only one construction and no other, and the construction is the one suggested by Mr. Choudhary, the fact that by ado....