Penalty under excluded excise chapter could not be imposed on a 100% Export Oriented Unit.

A penal provision in one chapter of the Central Excise Rules, 1944 cannot be applied where the rules expressly exclude that chapter from governing the manufacturer. A 100% Export Oriented Unit was covered by Chapter V-A, and Rule 173Q, which fell in Chapter VIIA, could not be invoked against it because Rule 173A(2) excluded Chapter VIIA from applying to such manufacturers. Penalty under Rule 173Q was therefore not sustainable.

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Issues: Whether penalty under Rule 173Q of the Central Excise Rules, 1944 could be imposed on a 100% Export Oriented Unit governed by Chapter V-A of the Central Excise Rules, 1944.

Analysis: The unit was a 100% Export Oriented Unit covered by Chapter V-A of the Central Excise Rules, 1944. Rule 173Q, under which penalty had been imposed, falls within Chapter VIIA. Rule 173A(2) provides that the provisions of Chapter VIIA do not apply to a manufacturer to whom Chapter V-A applies. Since the respondent was governed by Chapter V-A, the penal provision in Chapter VIIA could not be invoked against it.

Conclusion: Penalty under Rule 173Q was not sustainable against the respondent.

Ratio Decidendi: A penal provision contained in a chapter of the Central Excise Rules, 1944 cannot be applied to a manufacturer when the rules expressly exclude that chapter from governing the manufacturer.

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