Modvat credit procedure breach can attract penalty under Rule 173Q even when the lapse is technical and no revenue loss is shown.

Penalty under Rule 173Q of the Central Excise Rules was upheld because Modvat credit was availed in breach of the prescribed procedure, including the required debit and recredit mechanism for job work movements. The technical character of the lapse and the absence of revenue loss did not cure the violation of the statutory rules, and the plea that there was no intention to evade duty was held insufficient once the mandated procedure was not followed. Authorities relied on by the assessee were distinguished on facts and treated as inapplicable, so the order setting aside the penalty was reversed and the penalty restored.

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Issues: Whether penalty under Rule 173Q of the Central Excise Rules was rightly imposed for wrongful availment of Modvat credit contrary to the prescribed procedure, despite the lapse being technical and causing no revenue loss.

Analysis: The disputed credit could not be taken in the manner adopted by the respondents, and the prescribed procedure for debit and recredit in relation to job work movements was not followed. A mere technical character of the lapse and absence of revenue loss did not negate the breach of the governing rules. The plea of absence of intention to evade duty was also held insufficient where the statutory procedure had been violated. The decisions relied upon by the respondents were distinguished on facts and found inapplicable.

Conclusion: Penalty under Rule 173Q was justified, and the order setting it aside was unsustainable.

Final Conclusion: The Revenue succeeded, the appellate order was set aside, and the adjudicating authority's order restoring the penalty stood revived.

Ratio Decidendi: Breach of the prescribed excise procedure for availing credit can attract penalty under Rule 173Q even where the lapse is technical and no revenue loss is shown.

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