Rule 173Q penalty and PLA shortfall: honoured cheques and paid interest weakened the case for pre-deposit recovery stay.

Penalty under Rule 173Q was considered unsustainable on the stated facts because duty cheques were honoured, the duty was credited to the exchequer, and interest for delayed payment was also discharged through PLA debits. The absence of sufficient balance in the PLA, by itself, was treated as relevant only where payment was actually made from that account, and did not clearly attract Rule 173Q, though it might engage Rule 226. Prior acceptance of the duty and interest payments by the department further weakened the penalty basis. On that footing, the appellant was found to have established a strong prima facie case for waiver of pre-deposit and stay of recovery pending appeal.

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Issues: Whether the appellant had made out a strong prima facie case for waiver of pre-deposit and stay of recovery of the penalty imposed under Rule 173Q of the Central Excise Rules, 1944.

Analysis: The penalty was based on the allegation that duty had been paid by cheques without maintaining sufficient balance in the PLA. The cheques were nevertheless honoured, the duty amounts were credited to the exchequer, and interest on delayed payment was also discharged through PLA debits. On these facts, there was no apparent criminal intent to attract Rule 173Q. The question of sufficient balance in the PLA was treated as relevant only where payment was actually made from that account, and non-maintenance of PLA did not appear to fall within Rule 173Q, though it may attract Rule 226 of the Central Excise Rules, 1944. The earlier acceptance of the duty and interest payments by the department also indicated condonation of the lapse, weakening the basis for penalty.

Conclusion: The appellant had established a strong prima facie case, and waiver of pre-deposit with stay of recovery was justified pending the appeal.

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