Penalty for unnotified removal of capital goods fails absent intent to evade duty under the Central Excise Rules.

Penalty under Rule 173Q of the Central Excise Rules, 1944 was not sustainable where capital goods were removed to a job worker, returned within the stipulated period, and the only lapse was failure to intimate the department. The clauses of Rule 173Q required a contravention of the Modvat or Central Excise Rules to be coupled with intent to evade duty before penalty could be imposed. As no such intent was found on the recorded facts, the penalty was held not warranted and was set aside.

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Issues: Whether penalty under Rule 173Q of the Central Excise Rules, 1944 was sustainable for removal of capital goods to a job worker without intimation to the department, when the goods were returned within the stipulated period and no intent to evade duty was found.

Analysis: The only lapse established was non-intimation of removal of capital goods to the job worker as required under Rule 57-S(7) of the Central Excise Rules, 1944. Rule 173Q(1)(bb) dealt with contravention of Modvat provisions, while Rule 173Q(1)(d) applied where contravention of the Central Excise Rules, 1944 was accompanied by intent to evade payment of duty. Reading the clauses together, penalty was justified only where the contravention was coupled with such ulterior intent. On the facts recorded by the lower authorities, no intent to evade duty had been found.

Conclusion: Penalty under Rule 173Q was not warranted and was liable to be set aside.

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