Condoned delay in Modvat declaration regularised the lapse, so penalty under Rule 173Q could not survive.

Condonation of a 16-day delay in filing the Modvat declaration under Rule 57G, followed by acceptance of the declaration and grant of credit, regularised the earlier lapse. Once the delayed declaration was acted upon, the alleged contravention no longer survived, so the basis for penalty under Rule 173Q disappeared. The penal order was therefore unsustainable and was set aside in favour of the assessee.

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Issues: Whether penalty under Rule 173Q was sustainable after the appellate authority condoned the delay in filing the Modvat declaration under Rule 57G and allowed the credit.

Analysis: The delay in filing the declaration was accepted as only 16 days and the belated declaration was acted upon by the lower appellate authority while allowing the Modvat credit. Once the declaration was accepted after condonation of delay, the earlier lapse stood regularised and the alleged contravention of Rule 57G no longer survived. In the absence of a surviving contravention, the foundation for penalty under Rule 173Q was removed.

Conclusion: The penalty was not sustainable and was set aside in favour of the assessee.

Final Conclusion: The appeal succeeded and the penal order was annulled because acceptance of the delayed declaration removed the basis for invoking the penalty provision.

Ratio Decidendi: Where a delayed statutory declaration is condoned and acted upon for granting credit, the underlying contravention stands regularised and a penalty dependent on that contravention cannot survive.

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