Clandestine removal penalty under Section 11AC remains valid despite additional Rule 173Q invocation, but may be reduced on facts.

Admitted clandestine removal of excisable goods during the period when Section 11AC of the Central Excise Act, 1944 was operative attracted mandatory penalty. The fact that the adjudicating authority also invoked Rule 173Q of the Central Excise Rules, 1944 did not by itself invalidate the penalty, because the earlier authorities relied on concerned pre-Section 11AC periods and were distinguishable. Since the duty demand arose within the Section 11AC regime, penalty remained legally leviable. However, immediate payment of duty after detection justified reduction of the penalty on the facts, and the penalty was sustained only in a reduced amount.

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Issues: Whether penalty was exigible for clandestine removal of excisable goods for the period when Section 11AC of the Central Excise Act, 1944 was in force, despite the adjudicating authority having also invoked Rule 173Q of the Central Excise Rules, 1944, and whether the penalty should be sustained or reduced.

Analysis: The admitted clandestine removal of excisable goods brought the case within the ambit of Section 11AC of the Central Excise Act, 1944. The mere fact that the penalty had been imposed both under Section 11AC and under Rule 173Q of the Central Excise Rules, 1944 did not invalidate the penalty. The earlier decisions relied upon by the lower appellate authority were found distinguishable because they related to a period before Section 11AC came into force. As the duty demand related to a period when Section 11AC was operative, penalty was held to be imposable. Considering that the duty had been paid immediately after detection, a reduced penalty was found appropriate.

Conclusion: Penalty was upheld as legally leviable, but it was reduced to Rs. 10,000.

Final Conclusion: The appeal succeeded only to the limited extent of sustaining penalty while substantially reducing its amount on the facts of the case.

Ratio Decidendi: Where clandestine removal is admitted and the relevant period falls within the operation of Section 11AC of the Central Excise Act, 1944, penalty is attracted, and invocation of an additional penalty provision does not by itself render the penalty unsustainable.

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