Excess credit used for duty payment sustains penalty, though the penalty quantum may be reduced on facts.

Excess credit under Rule 173Q of the Central Excise Rules, 1944 attracted penalty where the credit was not only taken but also actually utilised for payment of duty on clearances. On those facts, the wrongful credit was treated as having been put to use, making penalty sustainable. The amount of penalty was nevertheless reduced because the quantum imposed was considered excessive in the circumstances. The document therefore states that liability to penalty was maintained, while the penalty was moderated on facts.

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Issues: Whether penalty under Rule 173Q of the Central Excise Rules, 1944 was justified where excess credit was taken and utilised for payment of duty, and whether the quantum of penalty called for reduction.

Analysis: The excess credit was not merely reflected in the records but was also utilised for clearance of goods by debiting duty. On these facts, the taking and utilisation of higher credit showed that the wrongful credit had been put to use, making the levy of penalty sustainable. At the same time, the facts justified interference on the quantum, as the amount imposed was considered excessive in the circumstances.

Conclusion: The penalty under Rule 173Q was upheld, but its amount was reduced.

Final Conclusion: The appeal succeeded only to the limited extent of reducing the penalty, while the finding of liability to penalty remained intact.

Ratio Decidendi: Where excess credit is taken and actually utilised for payment of duty, penalty is maintainable, though the quantum may be moderated on the facts of the case.

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