Prince Multiplast Pvt. Ltd. vs Union of India

Harsha Devani, J.—By this petition under Article 226 of the Constitution of India, the petitioners have challenged the order No. CI/674-76/WZB/2003, dated 11-3-2003 2003 (154) ELT 461 passed by the Customs. Excise & Gold Control Appellate Tribunal (the Tribunal), Regional bench, at Mumbai, insofar as the same confirms the fine of Rs. 5 lakhs and penalties of Rs. 3 lakhs and Rs. 2 lakhs on the petitioners.

The petitioner No. 1, a Private Limited Company is engaged in the business of manufacture of plastic crates which are used for transportation of soft drinks and other items. It is the case of the petitioners as stated in the petition that the crates are very bulky in nature and they require a very large space for storage. The petitioners manufacture plastic soft-drink crates for supply to M/s. Hindustan Coca Cola Beverages Pvt. Ltd. and during the relevant period, that is, July 1999 onwards, there was a considerable slow down in lifting of the finished goods by the said customer. Due to this, the petitioners had accumulated a huge inventory of plastic crates in the petitioners'' factory. Consequently, during the month of December 1999, the petitioners were holding stock of more than 11,00,000 plastic crates. According to the petitioners, the stock of crates lying in the factory in the month of December 1999 was ten times more than the normal inventory of crates maintained by the petitioners.

It is further the case of the petitioners that, on 2-12-1999, a huge fire accident had occurred in the factory of one of the plastic units viz., M/s. Super-maid belonging to the Time Packaging Group, situated in the vicinity of the petitioners'' factory in which the entire factory, plant, machinery, stock and building were destroyed. Since, the stock of finished goods lying in the factory of the petitioners was highest at an unprecedented level leaving practically no room for the movement of men and materials within the factory and in the outside compound of the factory, there was risk of destruction of goods and injury to men in case of unforeseen and untoward incident. The petitioners, therefore, first moved maximum material outside the factory building in the open compound and thereafter, approached the owners of the neighbouring premises, M/s. Navneet Publications (India) Ltd., who had vacant premises in the plot next to the petitioners'' plot. After obtaining such permission, the petitioners shifted around 70,000 plastic crates to the plot of M/s. Navneet Publications on emergency basis. According to the petitioners they had intended to include the said premises in the factory of the petitioners, however, considering the emergency situation, the petitioners had shifted the goods without gelling the said premises in the petitioners'' ground plan under the impression that the formality of inclusion of premises in the ground plan and taking permission for shifting the goods can be done on post facto basis considering the grave situation. However, before further action could be taken for inclusion of the neighbouring premises in the ground plan and obtaining permission to store the finished goods at the said premises, the officers of the Central Excise Department visited the said neighbouring premises and later on, the petitioners'' premises and seized the said 70,000 plastic crates shifted thereto. The officers also seized 87,500 plastic crates lying in the open factory compound on the alleged ground that since the said compound is common for two factories, both belonging to the petitioners, the goods stored in the said common compound were to be considered as stored in the premises of the petitioners'' other unit situated in the same factory compound. The officers also visited the petitioners'' factory premises on 8-12-1999 and seized one truck load with 4215 plastic crates which were leaving the factory. However, it is not necessary to refer to the said aspect in detail as the Tribunal has decided the issue with regard to the crates found in the truck in favour of the petitioners.

Pursuant to the aforesaid seizure, a show cause notice dated 7-6-2000 came to be issued to the petitioners for confiscation of the seized goods, for recovery of the duty and for imposition of penalty. The notice also proposed imposition of personal penalty on one of the Directors of the petitioners and authorized signatory of the petitioners. The show cause notice culminated into an Order-in-Original dated 26-2-2002, whereby the adjudicating authority ordered confiscation of the seized goods and imposed a redemption fine of Rs. 32,08,600/-, imposed penalty of Rs. 15 lakhs on the petitioner company as well as Rs. 10 lakhs and Rs. 5 lakhs on one of the Directors of the petitioner company and the General Manager cum Authorized Signatory, respectively. Being aggrieved, the petitioners went in appeal to the Appellate Tribunal who, vide the impugned order dated 11-3-2003, upheld the order of confiscation regarding goods other than 4,215 crates and the truck, reduced the redemption fine from Rs. 32,08,600/- to Rs. 5 lakhs and reduced penalties on the petitioner company from Rs. 15 lakhs to Rs. 3 lakhs, on the second petitioner Shri Lalit Nathji Chheda from Rs. 5 lakhs to Rs. 2 lakhs. Being aggrieved, the petitioners have filed the present petition, challenging the aforesaid order passed by the Tribunal, to the extent the same is adverse to the petitioners.

Mr. Paresh Dave, learned advocate appearing on behalf of the petitioners invited attention to the impugned order of the Tribunal and more particularly to paragraph 22 thereof, to submit that the Tribunal has found that the action of the petitioners in removing the goods from the place of manufacture and storing them in the adjacent premises, was not suggestive of intention to evade duty. It was submitted that in the facts of the present case, in the light of the circumstances narrated hereinabove, the petitioners were constrained to remove the excess stock lying in the factory to the neighbouring premises and to the open compound of the factory and that, the Tribunal, after appreciating the evidence on record, has recorded a finding that there was no intention on the part of the petitioners to evade duty. Inviting attention to the impugned order passed by the adjudicating authority, it was pointed out that the confiscation of the seized goods had been directed under Rule 173(Q)(1) of the Central Excise Rules, 1944 (Rules) and that the penalty had been levied on the petitioner under Rule 173(Q)(1) of the Rules read with Section 11AC of the Central Excise Act, 1944 (the Act), and penalties on the director and authorized signatory had been imposed under Rule 209A of the Rules.

Inviting attention to the provisions of Rule 173(Q) of the Rules, it was submitted that the said rule opens up with the words "subject to the provisions contained in Section 11AC of the Act and sub-rule (4) of Rule 57-I and sub-rule (6) of Rule 57-U", in the circumstances, it is only where a manufacturer, producer, registered person of a warehouse or a registered dealer commits any of the defaults specified in the said rule, and the said default is of a nature as contemplated u/s 11AC of the Act, 1944 and sub-rule (4) of Rule 57-I and sub-rule (6) of Rule 57-U, that the provisions of Rule 173Q of the Rules can be invoked. Referring to the provisions of Section 11AC of the Act, it was submitted that the said provision envisages non-levy, short levy etc. of duty by reason of fraud, collusion or any wilful misstatement or suppression of facts, or contravention of any of the provisions of the Act or the Rules made thereunder, with the intent to evade payment of duty. Referring to sub-rule (4) of Rule 57-I, it was submitted that the said provision also contemplates credit of duty being wrongly taken by reason of fraud, wilful mis-statement, collusion or suppression of facts, or contravention of any of the provisions of the Act or the Rules made thereunder with intent to evade payment of duty, and that, similar is the case which sub-rule (6) of Rule 57-U of the Rules. It was submitted that in the circumstances, for the purpose of invoking Rule 173A of the Rules, the Tribunal not only is required to record a finding to the effect that the petitioner has committed any of the defaults enumerated under the said rule, but is also required to record a finding that such default is for the reasons envisaged u/s 11AC of the Act and sub-rule (4) of Rule 57-I and sub-rule (6) of Rule 57-U of the Rules. It was submitted that in the present case, the Tribunal has specifically recorded a finding of fact to the effect that there was no intention on the part of the petitioners to evade payment of duty; in the circumstances the provisions of Rule 173Q of the Rules would not be applicable to the facts of the present ease. It was submitted that in the circumstances, in the absence of any intention on the part of the petitioners to evade payment of duty, confiscation of the seized goods could not have been ordered under Rule 173Q(1) of the Rules, nor could penalty have been imposed under the said rule. It was submitted that in the circumstances, the Tribunal was not justified in upholding the redemption fine to the extent of Rs. 5 lakhs and in upholding imposition of penalties under Rule 173Q(1)(b) of the Rules.

In support of his submissions the learned advocate placed reliance upon the decision of this High Court in the case of Commissioner of C. Ex. and Customs Vs. Saurashtra Cement Ltd., , wherein in the context of Rule 25 of the Central Excise Rules, 2002, it was held that since Rule 25 of the said Rules was subject to the provisions of Section 11AC, as a natural corollary, the ingredients mentioned in Section 11AC are also required to be considered while determining the question of levying penalty under Rule 25 of the Central Excise Rules.

As regards the imposition of penalty under Rule 209A of the Rules, it was submitted that in the facts and circumstances of the present case where an element of mens rea was missing, there was no justification for imposition of penalty under Rule 209A of the Rules. Reliance was placed upon the decision of the Supreme Court in the case of Hindustan Steel Ltd. Vs. State of Orissa, , for the proposition that an order imposing penalty for failure to carry out a statutory obligation is the result of a quasi criminal proceeding, and penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation. Penalty will not also be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances. The learned advocate, accordingly, submitted that in the present case, it is apparent that the petitioner had not acted deliberately or in defiance of the law and as such, penalty ought not to have been imposed on the petitioners. The decision of the Punjab & Haryana High Court in the case of Commissioner of Central Excise, Chandigarh v. Sadashiv Ispat Ltd., 2010 (255) E.L.T. 349 (P & H) was cited for the proposition that, where the Department had failed to prove the element of mens rea, no case was made out to impose penalty. Reliance was also placed upon the decision of the Bombay High Court in the case of Union of India Vs. Mohibali Roshanali Naser, for the proposition that a mere breach of condition would not ipso facto result in contravention. The Court in the facts of the said case held that the evidence indicated irregularity or a breach but nonetheless it would not constitute contravention by the petitioners.

It was, accordingly, urged on behalf of the petitioner that the impugned order of the Tribunal to the extent it confirms the redemption fine and imposition of penalties, is required to be quashed and set aside.

Resisting the petition, Mr. Varun Patel, learned Standing Counsel appearing on behalf of the respondents raised a preliminary objection to the very maintainability of the petition, contending that against the order of the Tribunal, the petitioners have an efficacious alternative remedy available under the provisions of the Central Excise Act and as such, the petition deserves to be dismissed on this count alone. Reliance was placed upon a decision of the Supreme Court in the case of State of U.P. and Another Vs. U.P. Rajya Khanij Vikas Nigam S.S. and Others, , wherein the Court had held that issuance of rule nisi or passing of interim orders is a relevant consideration for not dismissing a petition if it appears to the High Court that the matter could be decided by a writ court. However, it cannot be laid down as a proposition of law that once a petition is admitted, it could never be dismissed on the ground of alternative remedy.

Inviting attention to the Order-in-Original and more particularly to the contents of paragraph 33 thereof, it was submitted that the adjudicating authority had recorded that the petitioners had shifted the goods with an intention to evade the payment of duty and that the contention regarding the risk of fire was only an after-thought. Reliance was placed upon the affidavit in-reply filed on behalf of the respondents, to submit that the Tribunal felt that the goods were accounted for and there was a simple lapse on the part of the petitioners to obtain permission from the Department. However, the gravity of the offence committed by the petitioners becomes very high once it is found that the goods were not accounted for and were removed from the registered premises of manufacturer. In fact, the petitioners kept on piling up the goods in the said two premises for several days and when caught the petitioners have come out with the plea that the petitioners have simply failed to obtain permission from the Department. It was submitted that the conduct of the petitioners of removing the finished goods without entering the same in the statutory stock register to a different premises and not seeking permission from the Department, was not a technical breach, but a serious offence under the Central Excise Act. This was not a simple case of non-obtaining of permission from the Department, but a clear case of serious breach of the provisions of the Central Excise Act which might have resulted into illicit removal of the goods. It was submitted that in the circumstances, considering the gravity of the offence committed by the petitioners, the Tribunal was justified in upholding the penalty to the extent upheld by it.

Next, it was submitted that the contention as regards applicability of Rule 173Q of the Rules has been raised for the first time during the course of hearing of the present petition and that, no ground in respect thereof has been taken in the petition, and hence, the petitioners should not be permitted to raise the said ground during the course of hearing of the present petition. It was, accordingly, submitted that the impugned order of the Tribunal being just, legal and proper, does not warrant interference by this Court and that, the petitioners having an alternative remedy under the provisions of the Act, the petition deserves to be dismissed on the ground of maintainability alone.

Dealing with the contention as regards maintainability of the petition on the ground of there being an efficacious alternative remedy available under the provisions of the Central Excise Act, it is true that the Supreme Court in the case State of U.P. v. U.P. Rajya Khanij Vikas Nigam Sangharsh Samiti, (supra), has held that it cannot be laid down as a proposition of law that once a petition is admitted, it could never be dismissed on the ground of alternative remedy. However, in the said decision, the Court has observed that issuance of rule nisi or passing of interim orders is a relevant consideration for not dismissing a petition if it appears to the High Court that the matter could be decided by a writ court. Moreover, as rightly contended by the learned advocate for the petitioners, the objection as regards there being an alternative remedy available to the petitioners has not been raised at the time of admission of the petition, nor has the said ground been raised in either of the two affidavits filed by the respondents. In the circumstances, at this stage, after a period of more than seven years, this Court is not inclined to relegate the petitioners to avail of the alternative remedy, more so when the petition involves a neat question of law as regards the applicability of Rule 173Q and of the Rules. As held by the Supreme Court in the decision referred to hereinabove, if it appears to the High Court that the matter can be decided in a writ petition, the petition need not be dismissed on the ground of there being an alternative remedy.

Insofar as the objection to the raising of a new ground in relation to the applicability of the provisions of Rule 173Q of the Rules is concerned, it is true that no such ground has been specifically pleaded in the petition, however, the petitioners have specifically averred in the petition that as there was no intention to evade duty on the petitioners'' part and failure on the part of the petitioners was of not obtaining a simple permission, none of the ingredients necessary for justifying even a token penalty were satisfied. It is averred in the petition that the acts of confiscation and imposition of fine as well as penalty would be justified only when an assessee was guilty of contumacious conduct, but not when there was only a technical or venial breach on the part of the assessee. Moreover, it is an admitted position that the contention as regards the applicability of the aforesaid rules had been raised before the lower authorities. Hence, it is not as if the respondents are not aware of such a contention having been raised. Further, the contention as regards the applicability of the aforesaid rules is a pure question of law and as such, it is permissible for the petitioners to raise the said contention even at this stage, more so, when it goes to the root of the matter inasmuch as, if the petitioners succeed on the issue, the fine and penalty levied under Rule 173Q of the Rules would be without jurisdiction.

In the light of the aforesaid facts and contentions raised by the learned advocates for the respective parties, the core issue that arises for consideration is as to whether in the facts and circumstances of the case, the Tribunal was justified in confirming the redemption fine of Rs. 5 lakhs and penalty of Rs. 3 lakhs under Rule 173Q of the Rules. In this regard, it would be germane to refer to Rule 173Q of the Rules which insofar as the same is relevant for the present purpose, reads as under :

Rule 173Q - Confiscation and penalty :

(1) Subject to the provisions contained in section 11AC of the Act and sub-rule (4) of Rule 57-J and sub-rule (6) of Rule 57-U, if any manufacturer, producer, registered person of a warehouse or a registered dealer -

(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

(bb) xxx

(bbb) xxx

(c) xxx

(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 he, shall be liable to a 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.

Thus, Rule 173Q lays down that if any manufacturer, producer, registered person of a warehouse or a registered dealer commits any of the defaults enumerated thereunder, then subject to the provisions contained in Section 11AC of the Act and sub-rule (4) of Rule 57-I and sub-rule (6) of Rule 57-U, the same shall entail liability of confiscation of goods and penalty as prescribed thereunder. The expression "subject to" has been interpreted by the Supreme Court in various decisions.

In K.R.C.S. Balakrishna Chetty and Sons and Co. Vs. The State of Madras, , the Supreme Court held thus :

u/s 13 an important condition imposed under the Act is the keeping by the dealer and every person licensed of true and correct accounts showing the value of the goods sold and paid by him. Next there is Rule 5 of the General Sales Tax Rules which provided that if any person desired to avail himself of the exemption provided in Section 5, he had to submit an application in Form I for a licence and the Form of the licence shows that the licence was subject to the provisions of the Act and the rules made thereunder which required the licensee to submit returns as required and also to keep true accounts u/s 13. This shows that the giving of the licence was subject to certain conditions being observed by the licensee and the licence itself was issued subject to the Act and the rules. But it was contended that the words "subject to" do not mean "conditional upon but "liable to the rules and the provisions" of the Act. So construed Section 5 will become not only inelegant but wholly meaningless. On a proper interpretation of the section it only means that the exemption under the licence is conditional upon the observance of the conditions prescribed and upon the restrictions which are imposed by and under the Act whether in the rules or in the licence itself; that is, a licensee is exempt from assessment as long as he conforms to the conditions of the licence and not that he is entitled to exemption whether the conditions upon which the licence is given are fulfilled or not. The use of the words "subject to " has reference to effectuating the intention of the law and the correct meaning, in our opinion, is "conditional upon".

In Ashok Leyland Ltd. Vs. State of Tamil Nadu and Another, , the Supreme Court held thus :

Section 9(2) of the Act is subject to the other provisions of the Act which would include sub-section (2) of Section 6-A of the Act. "Subject to" is an expression whereby limitation is expressed.

In Black''s Law Dictionary, 5th Edn., at p. 1278, the expression "subject to" has been defined as under :

Liable, subordinate, subservient, inferior, obedient to; governed or affected by; provided that; provided; answerable for. Homan v. Employers Reinsurance Corpn, 345 Mo 650

In S.N. Chandrashekar and Another Vs. State of Karnataka and Others, , the Supreme Court followed its earlier decision in the case of Ashok Leyland Ltd. v. State of T.N. (supra) and held that the words "subject to" used in Section 14 of the Karnataka Town and Country Planning Act, 1961 are of some significance. The said words must be given full effect to.

Thus as laid down by the Supreme Court the use of the words "subject to" has reference to effectuating the intention of the law and the correct meaning, is "conditional upon". Rule 173Q opens with the words "subject to the provisions contained in Section 11AC of the Act and sub-rule (4) of Rule 57-I and sub-rule (6) of Rule 57-U". Thus, confiscation of goods and levy of penalty under Rule 173Q of the Rules is conditional upon the requirements of Section 11AC and sub-rule (4) of Rule 57-I and sub-rule (6) of Rule 57-U being satisfied. Thus, the words "subject to" used in the said rule express a limitation on the power to confiscate goods and levy of penalty under the said rule.

Thus, what has to be seen is as to what are the requirements of Section 11AC of the Act and sub-rule (4) of Rule 57-I and sub-rule (6) of Rule 57-U of the Rules so as to call for invocation of the provisions of Rule 173Q of the Act. On a plain reading of Section 11AC of the Act it is apparent that to invoke the provisions of the said section, the condition precedent which is required to be fulfilled is that, there should be non-levy, short levy, etc., of duty by reason of fraud, collusion or any wilful misstatement or suppression of facts, or contravention of any of the provisions of the Act or the Rules made thereunder, with intent to evade payment of duty. Likewise, sub-rule (4) of Rule 57-I of the Rules speaks of wrongful taking of credit of duty paid on inputs by reason of fraud, willful misstatement, collusion or suppression of facts, or contravention of any of the provisions of the Act or the Rules made thereunder with intent to evade payment of duty. Similarly, sub-rule (6) of Rule 57-U of the Rules speaks of wrongful taking credit of the specified duty paid on capital goods by reason of fraud, wilful misstatement, collusion or suppression of facts, or contravention of any of the provisions of the Act or the Rules made thereunder with intent to evade payment of duty. Thus, for the purpose of invoking either of the aforesaid three provisions, the condition precedent which is required to be fulfilled is that there should be fraud, wilful mis-statement, collusion or suppression of facts, or contravention of any of the provisions of the Act or the Rules made thereunder on the part of the petitioner, with intent to evade payment of duty.

Clause (a) sub-rule (1) of Rule 173Q of the Rules would be attracted only where a manufacturer, producer, registered person of a warehouse or a registered dealer removes excisable goods in contravention of any of the provisions of the Rules; and clause (b) thereof would be attracted if such person does not account for any excisable goods manufactured, produced or stored by him. In the present case, the Tribunal, on facts, has found that clause (a) as well as clause (b) would be attracted. However, for the purpose of invoking Rule 173Q of the Rules, it is not sufficient that the ingredients of clause (a) and/or (b) or the other clauses set out under sub-rule (1) of Rule 173Q are satisfied. For the purpose of invoking Rule 173Q, the requirements of the relevant clause/clauses enumerated under sub-rule (1) of Rule 173Q as well as the requirements of Section 11AC of the Act and Rule 57-I (4) and 57-U (6) should cumulatively be satisfied. If any of the conditions is not satisfied, Rule 173Q cannot be invoked.

The aforesaid view is reinforced by the decision of this Court in the case of Commissioner of C.Ex. & Customs v. Saurashtra Cement Ltd. (supra) wherein it was held thus :

It is also to be borne in mind that Rule 25 starts with the word "Subject to the provisions of Section 11AC....". Section 11AC of the Central Excise Act deals with penalty for short levy or non-levy of duty in certain cases. It says that where any duty of excise has not been levied or paid or has been short levied or short paid or erroneously refunded by reasons of fraud, collusion or any wilful misstatement or suppression offacts, or contravention of any of the provisions of this Act or of the Rules made thereunder with intent to evade payment of duty, the person who is liable to pay duty as determined under sub-section (2) of Section 11AC, shall also be liable to pay a penalty equal to the duty so determined. For the purpose of invoking Section 11AC of the Act, the condition precedent is that the duty has not been levied, or paid or short-levied or short-paid or the refund is erroneously granted by reasons of fraud, collusion or any willful misstatement or suppression of facts. If these ingredients are not present, penalty u/s 11AC cannot be levied. Since Rule 25 can be invoked subject to the provisions of Section 11AC of the Act, as a natural corollary, the ingredients mentioned in Section 11AC are also required to be considered while determining the question of levying of penalty under Rule 25 of the Central Excise Rules.

Examining the facts of the present case, in the light of the aforesaid legal position, a perusal of the impugned order indicates that the Tribunal has recorded that the proceedings do not show whether the goods so stored were accounted in RG-1 Register. The assessee put forth strongly that all the goods were accounted for. The Commissioner in para 30 of his order does not bring out the basis for his belief that the goods were not so recorded. The Tribunal noted that the lack of accounting in RG-1 Register would attract penalty proceedings under Rule 173Q(1)(b) of the Rules and that the act of removal of goods without payment of duty which attracted provisions of Rule 173Q(1)(a) is much more serious. The Tribunal, however, in paragraph 22 of the order, has observed that the action of the petitioner of removing the goods from the place of manufacture and storing the same in adjacent premises was not suggestive of intention to evade duty. Thus, the Tribunal has noted that the provisions of clause (a) of sub-rule (1) of Rule 173Q and clause (b) of sub-rule (1) of Rule 173Q are duly satisfied. However, as observed hereinabove, for the purpose of falling within the ambit of Rule 173Q of the Rules, two conditions precedent have to be satisfied, firstly that one or more of the situations enumerated in the clauses under sub-rule (1) of Rule 173Q of the Rules have to be fulfilled, and secondly that the requirements of Section 11AC of the Act and sub-rule (4) of Rule 57-I and sub-rule (6) of Rule 57-U of the Rules, also have to be satisfied. If either of these conditions is not satisfied, the provisions of Rule 173Q of the Rules would not be attracted.

As noticed earlier, in the present case, though the Tribunal has found that clauses (a) and (b) of sub-rule (1) of Rule 173Q of the Rules are duly satisfied, the Tribunal has also recorded a finding of fact to the effect that the action of the petitioner of removing the goods from the place of manufacture and storing the same in adjacent premises was not suggestive of intention to evade duty. In the circumstances, the requirements of Section 11AC of the Act and sub-rule (4) of Rule 57-I and sub-rule (6) of Rule 57-U of the Rules are clearly not satisfied, inasmuch as apart from the fact that the Tribunal has found that the action of the petitioners was not suggestive of intention to evade duty, the Tribunal has not recorded any finding to the effect that the petitioner had removed the goods by reason of fraud, collusion or any wilful misstatement or suppression of facts, or contravention of any of the provisions of the Act or the Rules made thereunder, with the intent to evade payment of duty. In the circumstances, in the absence of any such findings as contemplated under the provisions of Section 11AC of the Act and Rules 57-I(4) and 57U(6) of the Rules having been recorded by the Tribunal, the basic requirement for invocation of Rule 173Q of the Rules is not fulfilled. In the circumstances, without satisfying the basic ingredients thereof, the seized goods could not have been confiscated and consequently no redemption fine could have imposed under Rule 173Q of the Rules, nor could any penalty have been imposed thereunder.

Insofar as the penalty under Rule 209A of the Rules is concerned, the said rule provides that any person who acquires possession of, or is in any way concerned in transporting, removing, depositing, keeping, concealing, selling or purchasing, or in any other manner deals with, any excisable goods which he knows or has reason to believe are liable to confiscation under the Act or the rules, shall be liable to a penalty not exceeding three times the value of such goods or five thousand rupees, whichever is greater. On behalf of the petitioners it has been contended that once it is held that the goods are not liable to confiscation, penalty u/s 209A of the Rules cannot be imposed for the reason that the condition precedent for invoking the said rule, viz., that the person concerned should have reason to believe that the goods are liable to confiscation would not be satisfied. According to the learned advocate if the goods are not liable to confiscation, the question of there being any reason to believe that the same are liable to confiscation would not arise, hence, penalty could not have been imposed under Rule 209A of the Rules. The submission advanced by the learned advocate for the petitioners does not merit acceptance for the reason that the requirements for confiscation and penalty under Rule 173Q of the Rules are different than the requirements for imposition of penalty under Rule 209A, inasmuch as for invoking Rule 209A of the Rules the ingredients of Section 11AC and Rules 57-I(4) and 57U(6) of the Rules are not required to be satisfied. In the circumstances, merely because confiscation under Rule 173Q is set aside as the ingredients of Section 11AC of the Act and Rules 57-I(4) and 57U(6) of the Rules are not satisfied does not mean that penalty u/s 209A cannot be levied if upon the evidence on record a case is made out for levy of such penalty. In this regard, a perusal of the order-in-original indicates that the petitioner No. 2 had in his statement recorded on 9-12-1999 admitted that the fact that, removal of goods in question without payment of Central Excise duty is an offence and that the goods are liable to confiscation being offending in nature. The Tribunal after appreciating the evidence on record was of the view that the petitioner No. 2 is liable for penalty by his actions and accordingly sustained the order of imposition of penalty on him. However, the Tribunal was of the view that the penalty should be commensurate with the gravity of the offence and accordingly reduced the penalty from Rs. 5,00,000/- to Rs. 2,00,000/-. Thus, the Tribunal upon appreciating the evidence on record arrived at the conclusion that the petitioner No. 2 is liable for penalty under Rule 209A of the Rules. In the circumstances, even if a different view is possible on the same set of facts and evidence, that by itself would not be sufficient to reverse the finding of the Tribunal that the petitioner No. 2 was liable to be penalized under Rule 209A of the Rules.

In the light of the aforesaid discussion, the impugned order No. CI/674- 76/WZB/2003, dated 11-3-2003 of the Tribunal, to the extent it upholds fine of Rs. 5 lakhs and penalty of Rs. 3 lakhs on the petitioners, cannot be sustained as being contrary to the provisions of Rules 173Q of the Rules. However, insofar as upholding of penalty of Rs. 2 lakhs on the petitioner No. 2 under Rule 209A of the Rules is concerned, the same does not warrant any interference.

For the foregoing reasons, the petition partly succeeds and is, accordingly, allowed to the following extent. The Impugned Order No. CI/674-76/WZB/2003, dated 11-3-2003 of the Tribunal, insofar as the same upholds imposition of fine of Rs. 5 lakhs and penalties of Rs. 3 lakhs on the petitioners, is hereby quashed and set aside. However, the penalty of Rs. 2 lakhs on the petitioner No. 2 under Rule 209A of the Rules is sustained. Rule is made absolute accordingly to the aforesaid extent, with no order as to costs.