Excise contravention for clearance without PLA balance led to penalty, but the quantum was reduced on the facts.

Clearing excisable goods after issuing a cheque without sufficient balance in the PLA was treated as a contravention of the Central Excise Rules, because the claimed departmental insistence on cheque payment was unsupported by any written or oral direction and the assessee could have deferred clearances until encashment. The penalty for breach of Rules 9(1), 52 and 173F was therefore sustained. On the facts, however, the penalty was considered excessive and was reduced from Rs. 50,000 to Rs. 30,000.

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Issues: Whether penalty imposed for clearing excisable goods without sufficient balance in the PLA before encashment of the cheque was justified, and whether the quantum of penalty called for reduction.

Analysis: The appellants cleared the goods after issuing a cheque in favour of the department, although they had no balance in the PLA on that date. The plea that the department had insisted on issuance of the cheque and that duty could not be discharged from the Modvat credit account was rejected for want of corroboration. The absence of any written or oral departmental direction, together with the availability of the option to defer clearances until encashment of the cheque, showed that the clearance was made in contravention of the excise rules. However, on the facts and circumstances of the case, the penalty amount was found excessive and warranted reduction.

Conclusion: The confirmation of penalty for contravention of Rules 9(1), 52 and 173F of the Central Excise Rules was upheld, but the penalty was reduced from Rs. 50,000 to Rs. 30,000.

Final Conclusion: The appeal succeeded only to the limited extent of reduction in penalty, while the finding of contravention and the imposition of penalty were otherwise maintained.

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