Penalty under Rule 173Q cannot exceed duty amount where duty is confirmed and paid before adjudication.

Penalty under Rule 173Q was treated as limited by Section 11AC where duty evasion had been accepted and the duty amount was deposited before adjudication concluded. As the goods had been removed without payment of duty, but the confirmed duty was only Rs. 15,300 and had already been paid, a penalty of Rs. one lakh was held excessive and unsustainable. The penalty was restricted to the duty amount, and the excess penalty was set aside.

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Issues: Whether the penalty imposed under Rule 173Q could exceed the duty evaded where duty had been confirmed under Section 11AC and the duty amount had already been deposited before adjudication.

Analysis: The appeal concerned only the quantum of penalty. The removal of goods without payment of duty stood accepted, but the duty involved was only Rs. 15,300/-, which had been deposited before the adjudication proceedings were concluded. The penalty under Rule 173Q was treated as subject to Section 11AC, and the maximum permissible penalty was therefore taken to be equivalent to the duty amount. On that basis, a penalty of Rs. one lakh was found to be excessive and unsustainable in law.

Conclusion: The penalty was restricted to Rs. 15,300/-, being equal to the duty amount, and the higher penalty was set aside.

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