Penalty under Section 11AC may be reduced absent wilful suppression; Rule 173Q confiscation fails below the duty threshold.

Penalty under Section 11AC was moderated because duty liability was admitted and paid, but the record did not show deliberate or wilful suppression; the penalty was therefore reduced. Confiscation of plant and machinery under Rule 173Q could not be sustained because the duty involved was below the prescribed threshold of Rs. 1 lakh; the confiscation was set aside. Penalties under Rule 173Q and Section 11AC were treated as independently operable, so the Rule 173Q penalty was upheld.

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Issues: (i) whether the penalty imposed under Section 11AC of the Central Excise Act, 1944 required reduction in the absence of deliberate or wilful suppression; (ii) whether confiscation of plant and machinery could be sustained under Rule 173Q of the Central Excise Rules when the duty involved was below the prescribed threshold; and (iii) whether the penalty imposed under Rule 173Q could coexist with the penalty under Section 11AC.

Issue (i): whether the penalty imposed under Section 11AC of the Central Excise Act, 1944 required reduction in the absence of deliberate or wilful suppression.

Analysis: The duty liability was not disputed and had been paid. The clearance of the goods without proper duty documents was admitted during investigation, but the record did not show any deliberate or wilful suppression of facts. In those circumstances, a lenient approach was warranted in fixing the quantum of penalty.

Conclusion: The penalty under Section 11AC was required to be reduced, and was reduced to Rs. 25,000/-.

Issue (ii): whether confiscation of plant and machinery could be sustained under Rule 173Q of the Central Excise Rules when the duty involved was below the prescribed threshold.

Analysis: Confiscation of plant and machinery under sub-rule (2) of Rule 173Q was permissible only where the duty involved exceeded Rs. 1 lakh. The duty involved in the present matter was Rs. 64,363/-, which was below the statutory threshold. Therefore, the confiscation order in respect of plant and machinery could not stand.

Conclusion: The confiscation of plant and machinery under Rule 173Q was set aside.

Issue (iii): whether the penalty imposed under Rule 173Q could coexist with the penalty under Section 11AC.

Analysis: The two provisions operated independently and could be invoked on the facts found against the assessee. The existence of a penalty under Section 11AC did not bar the separate invocation of Rule 173Q.

Conclusion: The penalty under Rule 173Q was upheld.

Final Conclusion: The order was modified only to the extent of reducing the penalty under Section 11AC and setting aside confiscation of plant and machinery, while the remaining reliefs and penalties were maintained.

Ratio Decidendi: Where there is no material showing deliberate or wilful suppression, penalty under Section 11AC may be moderated, and confiscation of plant and machinery under Rule 173Q cannot be ordered unless the duty involved crosses the prescribed monetary threshold; separate statutory penalties may operate independently if each is otherwise attracted.

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