Rule 173Q penalty notice not time barred where Modvat credit reversal was delayed and liability was undisputed.

Detection of input shortage during departmental verification, followed by delayed reversal of Modvat credit, supported issuance of a penalty notice under Rule 173Q of the Central Excise Rules, 1944. As the demand was confined to appropriation of the amount already debited and imposition of penalty, and there was no prescribed limitation period for issuing such a penalty notice, the plea that the notice was time barred was rejected. The penalty was therefore held sustainable.

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Issues: Whether the notice proposing penalty under Rule 173Q of the Central Excise Rules, 1944 was time barred and whether the penalty was liable to be set aside.

Analysis: The shortage of inputs was detected by departmental officers during verification. The assessee later reversed the Modvat credit after a considerable delay. The demand in the notice was confined to appropriation of the amount already debited and imposition of penalty. Since the liability to pay the amount was not disputed and there is no prescribed limitation period for issuing a notice for penalty under Rule 173Q, the plea of time bar could not be accepted.

Conclusion: The notice was not time barred and the penalty was sustainable. The appeal failed.

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