Penalty under Rule 173Q unsustainable where excess duty refund claim was not examined before imposing penalty.

Penalty under Rule 173Q was found unsustainable where the assessee had paid duty under the compounded levy scheme and raised a specific claim of excess duty payment and refund. The adjudicating authority rejected the request to avail the scheme but did not examine that refund plea before imposing penalty. In the absence of any specific violation of Rule 173Q, mere refusal of compounded levy benefit did not justify penal action. The matter required reconsideration on the assessee's claim that excess duty had been paid and refund was due.

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Issues: Whether penalty under Rule 173Q of the Central Excise Rules was sustainable when the assessee had paid duty under the compounded levy scheme and claimed refund of excess duty, and whether the assessee's plea regarding excess payment and refund required examination.

Analysis: The assessee had applied to opt for the compounded levy scheme under Rule 96ZNA of the Central Excise Rules and had paid duty accordingly. The record also showed a specific plea that excess duty had been paid and refund had been claimed. The adjudicating authority, while rejecting the request to avail the scheme, did not examine this plea and nevertheless imposed penalty. In the absence of any specific violation of Rule 173Q and when the duty position had already been substantially met, mere refusal of the compounded levy benefit did not by itself justify penalty. The plea regarding excess payment and refund ought to have been considered on the merits.

Conclusion: Penalty under Rule 173Q was not sustainable on the facts as found, and the matter required reconsideration by the adjudicating authority on the assessee's claim of excess duty payment and refund.

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