Penalty under revenue law requires a legally applicable provision and intentional violation; large revenue exposure alone is insufficient.

Rule 173Q penalty was held inapplicable where the assessee's clearances were under physical control within Chapter VIIA, so the penal provision could not be invoked on those facts. The mere fact that a substantial amount of revenue was involved was held insufficient to justify penalty, because revenue penalties are meant for substantial intentional violation of law or procedure, not as a retributive measure. Penalty therefore was not sustainable.

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Issues: Whether penalty under Rule 173Q of the Central Excise Rules, 1944 was attracted when the assessee's clearances were under physical control and the demand had been confirmed under Section 11A of the Central Excise Act, 1944, and whether the mere fact that substantial revenue was involved justified imposition of penalty.

Analysis: The appeal did not challenge the finding that the assessee's clearances were under physical control within Chapter VIIA, and on that basis Rule 173Q was held inapplicable. The mere magnitude of the revenue involved was held to be insufficient to sustain penalty, since penalty under revenue laws is meant for substantial intentional violation of law and procedure, not as a retributive measure.

Conclusion: Penalty under Rule 173Q was not sustainable, and substantial revenue involvement by itself did not justify levy of penalty.

Final Conclusion: The Revenue's challenge to the non-imposition of penalty failed.

Ratio Decidendi: A penalty under revenue legislation cannot be sustained merely because the amount involved is substantial; it must rest on a legally applicable penal provision and a substantial intentional violation of law or procedure.

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