Judgment:
1. These are three appeals filed by M/s.Canara Steel Ltd., M/s.Anil Sunil Trade & Investment (P) Ltd., and Shri.Sudhakar Pai, M.D. of M/s.Canara Steel Ltd., 2. Arguing for the appellants Shri.Rajeshwara Shastry, Learned Counsel submitted that the only point to be considered in these appeals is whether the goods which are lying in the factory but not accounted in RG I are liable to confiscation and consequently penalty can be imposed in terms of Rules 173 Q of the CER. He submitted that the issue involved herein has been settled in a number of cases including in the case of Bhillai Conductors (P) Ltd., Vs.CCE Raipur reported in 2000 (91) ECR 569 (T). In this connection he drew our attention to Para 32 as well as Para 51 of of the order. They are as under:- "The charge levelled against the appellants is that the fully manufactured goods were not entered in RG I register. According to the appellants, the impugned goods were manufactured on the very day the Officers visited and the same could not be entered because of quality test and they used to enter only after quality control test it was practice since number of years. Assuming there was a clear failure on the part of the appellants in not entering fully manufactured goods in the RG I Register in time, whether this omission can be considered as a breach with an intention to evade payment of duty to attract penal action in terms of Rule 173 Q, is an issue to be considered. Rule 173 Q a and Rule 226 are relevant in the context to deal with the issue involved in this case. I am not reproducing the relevant Rules since both the Rules have been reproduced in the proposed order written by my learned Brother Shri.Joglekar. Rule 173Q is a composite rule which deals with confiscation and penalty as the title of the Rule itself as styled as Confiscation and Penalty. To confiscate goods or to impose penalty in terms of Rule 173 Q, there must have been a contravention of the provisions of the Rule either in removing the excisable goods or with intent to evade payment of duty. Admittedly goods have not been remove in the instant case and no evidence was brought on record to establish that there was an attempt for illegal removal of such goods. It is not even the case of the Department that the goods were clandestinely removed or there was preparation for such removal. As can be seen from the provisions of Rule 173 Q, it is a penal clause and intention is in built in Rule 173 Q. Mens rea is an essential ingredient to attract this penal clause. Not entering in RG I itself will not be sufficient to take action under this Rule unless it was shown that books of account were not maintained with an intention to evade payment of duty. Rule 173 Q-1 (b) cannot be read in violation and it should be read with other provisions of Rule 173 Q particularly either with 173 Q-1 (a) or (d) to take penal action. In other words an action can be initiated under 173 Q if the goods have been removed in contravention of any of the Rules covered under 173 Q-1(a) or if there was an intent to evade payment of duty under 1 (d) and non-maintenance of books of account with reference to such excisable goods with an intent to evade payment of duty. For mere non-maintenance of accounts, an action cannot be taken under Rule 173 Q and in fact neither show cause Notice was issued under particular sub-clause 1 (b) of Rule 173 Q nor confirmed the penal action for contravention under sub-clause 1 (b) of Rule 173 Q. If the department were to take action under 173 Q for contravention of sub rule 173 Q 1 (b), for non-maintenance of account, there would there would have been no necessity of inserting Rule 226 for imposition of penalty for such purpose. It is clear from the wording of Rules 173 Q and 226 that an action can be taken under Rule 1 73 Q for non-maintenance of books of account with intent to evade duty and in other cases Rule 226 prevails. Simple failure could not attract penal action under Rule 173 Q. It is well settled that penal provision has to be construed strictly and in favour of the assessee unless the Court is compelled by the language to construe it otherwise. Decision referred to by the counsel on behalf of the appellants are of the consistent view in holding that no penal action can be taken under Rule 173 Q either in confiscating or imposing penalty unless the foods were removed illegally or final goods should have been in the preparation for such removal or they must have been seized while being transported without recovery or gate passes and without payment of duty.
Earlier cases Indian Cork Mills and Snack Foods Pvt. Ltd., referred to in the order written by my learned Brother are not applicable to the facts of this case for simple reason that there was a categorical finding in both cases that goods have been removed illegally. In the circumstances, I am of the view that goods are neither liable to confiscation and consequently no penalty can be imposed under Rule 173 Q in the absence of any evidence to show that there was any intention to evade payment of duty. Since there was a failure on the part of the appellants in as much as not maintaining proper books of account, they are liable to penalty under Rule 226. Accordingly I propose to levy penalty of Rs.2,000/- under Rule 226. In the view taken I propose to set aside the order of confiscation and penalty under Rule 173 Q but penalty is leviable at Rs.2000/- under Rule 226." "I have considered the above submissions as well. Without going into the conflict of 'Rule 173 Q versus Rule 226 visualised by the learned DRs, I may observe that even if it is assumed that Rule 173 Q has over riding effect vis-a-vis Rule 226 (as contended by the DRs) the position would not change for the better for the Revenue in as much as the appellants case is one covered not by Clause (b) of Rule 1 73 Q(1) simpliciter but by Clause (d) read with Clause (b) of the Rule if not squarely by Clause (d) itself. The case would not warrant confiscation and penalty since no mensrea was involved in the non-accountal of the goods in RG I Register. A case of non-accountal without mensrea is a minor offence which can at best attract a penalty of Rs.2000/- alongwith confiscation of the goods under Rule 226 ibid. The Learned Member (J) has rightly held, having regard to the facts and circumstances of the case, that a penalty of Rs.2000/- for non-accountal in RG I would suffice to meet the ends of justice in the case. I would concur with the view taken by the Learned Member (Judicial). The point of difference is answered accordingly".
3. He also submitted that at present procedure of maintaining accounts in RG I has been done away with. He said in view of the aforesaid decision the goods which are un-accounted are not liable for confiscation under Rule 173 Q as there is no evidence of attempt to evade payment of duty. He said that R.F of Rs.2 lakhs has been imposed on M/s.CSL in addition to imposition of penalty of Rs.1 lakh under 173 Q. Further a sum of Rs.10,000/- was also imposed on M.D. under Rule 209 A, cannot be imposed on M/s.ASTIPL because of the fact that they were lessee upto 21.1.94 only and since the date of seizure was on 11.9.95, in no way they were connected with the goods. Nothing has been brought on record to show that they have got any role to play in not accounting the impugned goods. Similarly penalty of Rs.10,000/- on M.D. is not justified. Since he was placed at Manipal whereas the appellants factory was situated at Mangalore. He submitted that he was not looking the day to day affairs and no evidence has been brought on record to show whether he has any role to play in the day to day activities of the Company. In support of his contention he relied upon the decision of the Tribunal in the case of TTK Prestige Ltd., & Anr. Vs.CCE Bangalore reported in 2000 (91) ECR 562 (T). Particularly he drew our attention to Para 13 of the said order. In that case it was held that Senior Vice President was not the person responsible for maintenance of records or for removal of goods, hence benefit of doubt is granted and personal penalty is set aside.
4. Heard Thomas JDR who reiterated the findings given by the authorities below in levying the duty as well as penalty under Rule 173 Q (1) of the CER.5. We have carefully considered the matter. We find that there is substantial force in the arguments advanced on behalf of the party that the goods are not liable for confiscation since the goods were lying in the factory and nothing has been brought on record to show that there was an attempt to clear the goods without payment of duty. Further the decision of the larger bench in the case of Bhillai Conductors (P) Ltd., (Supra) (SIC)applicable and no contrary decision has been brought to our notice. Further we take note of the observations made by the Tribunal in the case of Kanthal India Ltd., Vs.CCE Allahabad reported in 1999 (108) ELT 385 (T) and para 7 of the said order is relevant in this context and the same is reproduced below:- "Although Rule 173 Q prescribes for confiscation of the goods in contravention of the provisions of the Rules with intent to evade payment of duty, the fact remains that while initiating the penal action, facts and circumstances of each case are relevant, whether penal action was justified and if so to what extent. In other words, quantum of penalty depended upon the gravity of the offence committed by the assessee. The Supreme Court has taken the view that penalty should not be levied for the sake of imposition of penalty and penalty also should not be the main source of revenue. In the present case, there is no clear finding by the adjudicating authority that there was an attempt to evade payment of duty. As can be seen from the records, redemption fine as well as penalty has been imposed for non-accounting the goods in the RG 1 Register.
There is no iota of evidence to show that the party has attempted to remove the goods without payment of duty. In view of the facts and circumstances, of the case, I am of the that redemption fine is not justified. Accordingly, I set aside the redemption fine but for this modification, the orders passed by the authorities below are upheld. It is accordingly ordered. The appeal is disposed of in the above terms".
6. Following the observations cited above as well as the ration of decision of the larger Bench (Supra) we hold that goods are not liable for confiscation and conseq-uently Redemption Fine cannot be imposed.
We do so accordingly. In the view we have taken Redemption fine of Rs.2 lakhs is set aside. However in the facts & circumstances penalty is reduced to Rs.25,000/- as against Rs. 1 lakh imposed on M/s.CSL. As regards penalty imposed on M/s.ASTIPL and M.D. we do not find any justification to impose penalties on them since nothing is brought on record to show that they have got any role to play in un-accounting the goods. Accordingly penalty imposed on them is set aside.