Penalty for short duty payment fails where price fluctuations and communication gaps exist without suppression or intent to evade.

Penalty under Rule 173Q of the Central Excise Rules, 1944 is not sustainable where short payment of duty arises from day-to-day price fluctuations and communication gaps between depot and factory, and the record shows no wilful misstatement, suppression of facts, or intent to evade duty. On those findings, the ingredients necessary to invoke Section 11AC of the Central Excise Act, 1944 are absent, and the same factual basis cannot support penalty under Rule 173Q.

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Issues: Whether penalty under Rule 173Q of the Central Excise Rules, 1944 was sustainable when the short payment arose from price fluctuation and communication gaps, and when the authority had found no wilful misstatement or suppression of facts with intent to evade duty so as to attract Section 11AC of the Central Excise Act, 1944.

Analysis: The findings recorded in the appellate order showed that the variation in declared depot prices and the prices adopted for duty payment occurred because of day-to-day price fluctuations and communication gaps between the depot and the factory. It was also noticed that in some instances the duty had been paid on values higher than the prevailing depot prices. On those findings, the essential ingredients of wilful misstatement, suppression of facts, or intent to evade duty were absent. Once such ingredients were not established, the basis for penalty under Section 11AC disappeared, and the same factual foundation could not be used to sustain penalty under Rule 173Q.

Conclusion: Penalty under Rule 173Q was not leviable, and the appellants were entitled to relief.

Ratio Decidendi: Where short payment of duty results from price fluctuations and communication gaps, and there is no wilful suppression or intent to evade duty, penalty provisions requiring such culpable conduct cannot be invoked.

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