Retrospective penalty under central excise law rejected; penalty also could not be shifted on appeal to Rule 173Q.

A penalty for short payment of central excise duty for August 1994 could not be sustained under Section 11AC because that provision was not in force for the relevant default. The appellate authority also could not uphold the penalty by shifting the basis to Rule 173Q(1) when the original adjudication had proceeded on a different footing. The operative effect was that the penalty failed under both provisions, as the liability could not be retrospectively tested under Section 11AC and the appellate confirmation under an alternative rule was impermissible in the circumstances.

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Issues: Whether penalty could be sustained under Section 11AC of the Central Excise Act for a short payment of duty pertaining to August 1994, and whether the Commissioner (Appeals) could confirm the penalty under Rule 173Q(1) of the Central Excise Rules.

Analysis: The liability arose from a period prior to the coming into force of Section 11AC, so that provision was held inapplicable to the default. The appellate authority then attempted to sustain the penalty under Rule 173Q(1), but such invocation was treated as impermissible in the circumstances, since the adjudication had proceeded on a different footing and the penalty could not be upheld by shifting the basis in appeal.

Conclusion: The penalty could not be sustained under Section 11AC or under Rule 173Q(1); the assessee succeeded.

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