Ashutosh Mohunta, J.@mdashThe Revenue has impugned the order (Annexure P-3) passed by the Customs, Excise and Service Tax Appellate Tribunal (for short ''the Tribunal'') dated 22.12.2004, vide which the appeal of the Revenue was dismissed and it was held that there was no mens rea on part of the respondent to clandestinely remove the finished goods from the factory premises.
2. The respondent M/s Sadashiv Ispat Ltd. are manufacturers of alloy steel flats/bars and rounds, falling under Chapter 7226.00 and 7228.00 of Schedule to Central Excise Tarrif Act, 1985. On 18.2.2000, the Officers of Central Excise Department, Chandigarh inspected the factory premises of the respondent and found that 43.552 MTs of alloy steel flats and 11.998 MTs of alloy steel rounds were not recorded in the RG-1 register. The Managing Director of the respondent concern was unable to give a satisfactory reply for not recording the finished goods in the RG-1 register. It was stated by him that as he was away for few days, hence there was a negligence on part of the staff.
3. A show cause notice was issued to the respondent, who replied to the same. However, it was found that the respondent intended to clandestinely remove the finished product of alloy steel flats and rounds and accordingly, the order of confiscation of goods as well as fine and penalty was passed on 10.1.2001, by the Joint Commissioner (Annexure A-1).
4. M/s Sadashiv Ispat Ltd. filed an appeal challenging the order passed by the Joint Commissioner, Central Excise in which the Commissioner, Central Excise, Chandigarh vide his order dated 22.5.2003, found that there was no intention on part of M/s Sadashiv Ispat Ltd. to clandestinely remove the finished product and hence the order of confiscation was set aside, however, the penalty was reduced from Rs. 50,000/-to Rs. 20,000/-. The aforementioned order was challenged by the Revenue by filing an appeal before the Tribunal which was dismissed vide order dated 22.12.2004 Annexure A-3.
5. Mr. Kamal Sehgal, counsel for the Revenue has vehemently argued that the respondent had mens rea and the intention to remove the finished products clandestinely. The goods were duly finished and the same had not been annealed and painted. It is contended that in order to sell alloy slabs and rounds, it is not necessary to anneal and paint the said goods and that the respondent in their manufacturing process submitted to the Department have mentioned annealing and painting to be one of the essential processes before the finished product can be sold.
6. Mr. Jagmohan Bansal, counsel for the respondent, however, submits that even finished products cannot be entered in the RG-1 register immediately because of lack of staff or non-reporting on part of the staff and hence, at the most, it can be termed as irregularity.
7. We have heard the counsel for the parties at length.
8. A perusal of the impugned order shows that no evidence has been produced by the Revenue that the respondent had cleared the goods unaccounted and the goods were kept for clandestine clearance. In the present case, even if the goods had not been entered in the RG-1 register, yet the same cannot lead to the conclusion that the goods were meant for clandestine removal. Both the Commissioner as well as the Tribunal have returned a concurrent finding of fact that there was no mens rea on part of the respondent to clandestinely remove the goods.
9. The appellant had formulated the following question of law for adjudication by this Court:
10. Whether mens-rea is a pre-condition for confiscation of unaccounted exciseable goods under Rule 1730 (a), (b), (c) of erstwhile Central Excise Rules, 1944 and present Rule 25 (a), (b), (c) of Central Excise Rules, 2002?
11. This question has squarely been answered by a Division Bench of this Court in Commissioner of Central Excise, Jalandhar v. Indo German Fabs reported as 2007(209) E.L.T. 184 (P&H), wherein while relying on the judgement of Hon''ble Supreme Court in Hindustan Steel Ltd. v. State of Orrisa reported as 1978(2) ELT (J159) (S.C.), it was held that element of mens rea is normally required to be shown for imposition of penalty. Same view was taken in
12. In the present case, the Department has failed to prove the element of mens rea for imposition of penalty. It has been so held by the Commissioner as well as the Tribunal that no case was made out to impose penalty. The finding recorded that no case was made out for imposition of penalty is not shown in any manner to be perverse.
13. In view of the above, we find no merit in this appeal and the same is accordingly dismissed.
