Clandestine removal penalty under Rule 173Q not controlled by Section 11AC, but reduced because duty was already paid.

Penalty for clandestine removal under Rule 173Q was held not to be governed by Section 11AC where goods were removed without intimation and were absent from records, so the finding of suppression was sustained. The Tribunal accepted that the penalty could extend beyond the duty evaded in such cases, but it also considered that the duty had already been paid. On that basis, the penalty was upheld in principle but reduced in amount in favour of the assessee.

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Issues: Whether the penalty imposed for clandestine removal under Rule 173Q was liable to be reduced, and whether such penalty was controlled by Section 11AC.

Analysis: The appeal was confined to the quantum of penalty. The Tribunal held that penalty under Rule 173Q could extend beyond the amount of duty evaded and was not controlled by Section 11AC in cases involving clandestine removal or suppression of facts. Since the goods were removed clandestinely without intimation to the Department and were not found entered in the records, the finding of suppression was sustained. At the same time, the fact that the duty had already been paid was taken into account for reducing the penalty.

Conclusion: The penalty was upheld in principle, but its amount was reduced from Rs. 75,000/- to Rs. 50,000/- in favour of the assessee.

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