Clandestine removal and duty evasion justify Rule 173Q penalty despite post-detection payment of duty.

Where clandestine removal and deliberate evasion of duty are found on the basis of shortages detected by excise officers, subsequent debit of duty after detection does not make the statutory penalty under Rule 173Q inapplicable. The explanation offered for the shortages was unsupported, and the later payment was treated as non-voluntary because it followed departmental detection. On those facts, the penalty provision was attracted and its deletion was unjustified.

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Issues: Whether penalty under Rule 173Q could be dropped merely because the duty on shortage of raw material and finished goods was deposited before issuance of the show cause notice.

Analysis: The shortage of raw material and finished goods was detected by Central Excise officers during checking. No plausible explanation was offered for the shortages, and the explanation that the accountant was unavailable was not supported by evidence. The record indicated clandestine removal and deliberate evasion of duty. The subsequent debit of duty in the RG-23A Part-II register was made only after detection by the officers and was not voluntary. The precedents relied upon for dropping penalty were held inapplicable because, on the facts found, the respondents acted with a mala fide intention and the statutory penalty provision was attracted.

Conclusion: Penalty under Rule 173Q was rightly imposable, and its deletion was not justified. The issue is decided in favour of Revenue and against the respondents.

Ratio Decidendi: Where clandestine removal and deliberate evasion of duty are found, subsequent payment of duty after detection does not render the statutory penalty under Rule 173Q inapplicable.

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