Rule 173Q penalty for short-paid excise duty upheld, with mitigating circumstances reducing the penalty amount.

Filing a declaration and RT 12 returns did not relieve the assessee of the primary duty to pay correct excise duty before removal of goods. Where goods were cleared on short duty, the principle applied was that liability to confiscation attracted penalty under Rule 173Q, so penalty was permissible even though the short-paid duty was later paid after it was pointed out. The assessee's disclosure of clearances, absence of earlier departmental objection, and prompt payment were treated as mitigating circumstances relevant only to the quantum of penalty, which was reduced to a nominal amount.

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Issues: Whether penalty under Rule 173Q of the Central Excise Rules, 1944 was exigible where the assessee had filed declaration and RT 12 returns showing clearances, but had removed goods without paying the correct duty and paid the short-paid duty only after being pointed out.

Analysis: The respondents had not disputed the duty liability and the primary obligation to pay proper duty before removal of goods lay on them. Filing of declaration under Rule 173B and RT 12 returns did not displace the obligation to pay duty correctly before clearance. The argument that penalty was discretionary in nature was rejected in view of the settled principle that where goods are liable to confiscation, the person concerned is liable to penalty under Rule 173Q. At the same time, the respondents had disclosed the clearances, no departmental objection had been raised earlier, and the short-paid duty had been deposited promptly after being pointed out. These circumstances were treated as mitigating factors relevant to the extent of penalty.

Conclusion: Penalty under Rule 173Q was held to be imposable, but the amount was reduced to a nominal penalty of Rs. 5,000 in view of the mitigating circumstances.

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