Wilful intent is essential for excise penalty where excess duty payment is alleged to facilitate wrongful Modvat credit.

Penalty under Rule 173Q(1)(bbb) could not be sustained because the excess duty payment was not shown to be a wilful act intended to facilitate inadmissible Modvat credit to the buyer. The provision required deliberate conduct and wrongful particulars in the invoice, but the notice alleged no special relationship or extraneous interest between the manufacturer and the buyer, and the small excess payment was more reasonably treated as a mistake. The applicability of Rule 57E was regarded as debatable, but the matter was resolved on the absence of the necessary intent. Penalty was therefore not imposable.

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Issues: Whether penalty was sustainable under Rule 173Q(1)(bbb) of the Central Excise Rules, 1944 for allegedly paying duty in excess with intent to facilitate inadmissible Modvat credit to the buyer, and whether Rule 57E could be invoked on the facts.

Analysis: The excess duty payment was not shown to be a deliberate act to help the buyer take credit. The provision invoked requires a wilful act and an intent to facilitate wrongful credit through incorrect particulars in the invoice. The notice contained no allegation of any special relationship or extraneous interest between the manufacturer and the buyer, and the payment of a relatively small excess amount was more reasonably attributable to mistake. The question whether Rule 57E applied was considered debatable, but the penalty issue was resolved on the absence of the necessary intent.

Conclusion: Penalty was not imposable, and the assessee succeeded.

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