Excise penalty cannot survive without proof of clandestine removal or intent to evade duty.

Penalty under Rule 173Q(1) of the Central Excise Rules, 1944 could not be sustained where the demand itself was dropped and the record did not establish clandestine removal, non-duty-paid clearances, or any contravention with intent to evade duty. In the absence of a confirmed duty demand and supporting evidence of evasion, the legal foundation for penalty failed. The penalty was therefore set aside in favour of the assessee, confirming that excise penalty cannot survive without proof of the alleged violation and the requisite intent to evade duty.

---

---

Issues: Whether penalty under Rule 173Q(1) of the Central Excise Rules, 1944 could be sustained when the demand was dropped and no clandestine removal or violation with intent to evade duty was established.

Analysis: The demand based on alleged clandestine removal of aerated water was not upheld. The findings recorded did not establish removal of non-duty-paid goods or any violation of the rules with intent to evade duty. In the absence of a confirmed demand and in the absence of evidence supporting clandestine removal, the basis for imposing penalty was not made out.

Conclusion: Penalty under Rule 173Q(1) of the Central Excise Rules, 1944 was not sustainable and was rightly set aside, in favour of the assessee.

Final Conclusion: The appeal succeeded because the penalty could not survive once the alleged duty evasion and clandestine removal were not proved.

Ratio Decidendi: A penalty for excise violations cannot be sustained without proof of clandestine removal or other contravention established with intent to evade duty.

---