Penalty leniency denied after post-detection duty payment, while the additional penalty lacked proper legal basis and was set aside.

Leniency in penalty was declined because duty was paid only after departmental detection of the contravention, and voluntary confession or pre-detection payment was treated as the relevant basis for mitigation. The text also states that an additional penalty imposed with reference to Rule 173Q and connected rules lacked proper legal support and could not be sustained. As a result, the penalty reduction was refused on the facts, but the separate penalty order resting on those rules was set aside.

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Issues: Whether leniency in the quantum of penalty was warranted when duty was paid only after detection by the department, and whether penalty under Rule 173Q could be imposed in addition to penalty under Section 11AC.

Analysis: The liability to duty was not disputed, and the duty had already been paid. However, payment made after the department had detected the offence did not justify leniency in penalty. Leniency may be considered where an assessee makes a voluntary confession and pays duty before the department becomes aware of the contravention, but not where payment follows detection. The additional penalty of Rs. 50,000 imposed with reference to various rules was found unsustainable.

Conclusion: Leniency in penalty was declined, but the penalty imposed under Rule 173Q and the connected rules was set aside.

Ratio Decidendi: Leniency in penalty is not warranted where duty is paid only after departmental detection of the offence, though an additional penalty lacking proper legal basis cannot be sustained.

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