Rule 173Q penalty cannot stand for lawful removal of goods and paid duty without intent to evade

Rule 173Q penalty under the Central Excise Rules, 1944 was treated as unsustainable where goods were removed after following the prescribed excise procedure, duty had been paid, and the recorded facts showed no mala fide intent to evade duty. The appellate authority was recognised as a quasi-judicial body required to decide independently on the basis of law and facts, and not as a mere implementer of Board instructions. On that footing, the administrative circular could not compel a different result, and once the penalty provision itself was not validly attracted, no issue of penalty quantum arose.

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Issues: Whether penalty under Rule 173Q of the Central Excise Rules, 1944 was sustainable when the goods were removed after following the prescribed excise procedure and duty had been paid, and whether the appellate authority was bound by the Board's circular.

Analysis: The appellate authority was held to be a quasi-judicial authority required to decide independently on the basis of law and facts, and not as a mere implementer of Board instructions. On the facts recorded in the impugned order, the goods were removed after following the proper excise procedure and on payment of duty, with no mala fide intention to evade duty. In those circumstances, the invocation of Rule 173Q itself was found not maintainable, and once the penalty provision could not be validly invoked, the question of discretion in quantum did not arise.

Conclusion: The penalty was not sustainable, and the Board's circular did not compel a different result.

Final Conclusion: The challenge to deletion of penalty failed, and the assessee retained the benefit of the appellate relief.

Ratio Decidendi: Where the factual findings show lawful removal of goods after payment of duty and no intent to evade duty, penalty provisions like Rule 173Q cannot be invoked merely on the strength of an administrative circular.

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