Excise penalty requires proof of deliberate evasion, not mere stock shortage or delayed duty payment.

Penalty under excise penalty provisions is not sustainable merely because a stock shortage is found or duty is paid before adjudication. The note states that penalty under Rule 173Q and Section 11AC requires evidence of deliberate evasion, fraud, or suppression of facts. On the facts recorded, the shortage was explained as arising from peak season workload and staff lapse, the duty had already been discharged, and no material showed a culpable attempt to evade duty. The penalty was therefore deleted, while the duty demand remained undisturbed.

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Issues: Whether penalty under Rule 173Q of the Central Excise Rules and Section 11AC of the Central Excise Act could be sustained in the absence of evidence of deliberate suppression or fraud, where the duty had been paid before adjudication.

Analysis: Penalty under the cited provisions is attracted only where evasion of duty is established through fraud, suppression of facts, or similar culpable conduct. The facts showed a stock shortage noticed on physical verification, an explanation that the shortage arose from peak season workload and staff lapse, and payment of the duty before adjudication. The record did not disclose any material showing a deliberate attempt to evade duty. The explanation offered was treated as sufficient to account for the non-payment before clearance, and the demand itself had already been discharged.

Conclusion: The penalty was not sustainable and the assessee succeeded on this issue.

Final Conclusion: The appeal against deletion of penalty was rejected, leaving the duty demand undisturbed and the relief on penalty in favour of the assessee.

Ratio Decidendi: Penalty under the excise penalty provisions cannot be imposed merely on proof of shortage or delayed payment; it requires evidence of deliberate evasion, fraud, or suppression of facts.

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