Procedural lapse in credit declaration cannot attract penalty where capital goods credit is otherwise admissible and undisputed.

Delayed filing of a declaration for capital goods credit, coupled with failure to file a condonation application under Rule 57T(5), did not justify penalty where the credit itself had been allowed and its admissibility was never disputed. The omission was treated as a curable procedural irregularity arising from misplacement of the excise licence and declaration, not as a substantive breach warranting penal action. Penalty provisions under Rule 173Q(bb) were read as aimed at enforcing proper compliance in duty credit and accountal, not at punishing every technical default. On that basis, penalty was held unwarranted and was set aside.

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Issues: Whether penalty under Rule 173Q(bb) of the Central Excise Rules, 1944 was sustainable for delay in filing the declaration and non-filing of the condonation application under Rule 57T(5) of the Central Excise Rules, 1944 when eligibility to credit was not in doubt.

Analysis: The capital goods had been received and declarations under Rule 57T(1) of the Central Excise Rules, 1944 were filed, though delayed because of misplacement of the excise licence and the declaration. The credit itself was allowed and its admissibility was not disputed. In such circumstances, the omission to seek condonation for a procedural lapse was held to be a curable irregularity and not a basis for penal action. The provision for penalty was treated as intended for ensuring compliance in relation to duty credit and accountal, not for punishing every technical or procedural default.

Conclusion: Penalty under Rule 173Q(bb) of the Central Excise Rules, 1944 was not warranted and was set aside in favour of the assessee.

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