Penalty for unspecified excise contravention failed where no intent to evade duty was shown.

Penalty under Rule 173Q of the Central Excise Rules, 1944 was held unsustainable where the show-cause notice and adjudication order did not specify the exact sub-clause allegedly breached and the record showed no suppression, misstatement or intention to evade duty. The goods had been returned by buyers, reconditioned and remade under Rule 173H, and cleared in accordance with that rule. The dispute over whether the process amounted to manufacture under Chapter Note 2 of Chapter 29 concerned tariff interpretation and did not establish deliberate evasion. The penalty was set aside and the assessee obtained consequential relief.

---

---

Issues: Whether penalty under Rule 173Q of the Central Excise Rules, 1944 could be sustained when the show-cause notice and order did not specify the exact sub-clause contravened and the assessee had acted under Rule 173H of the Central Excise Rules, 1944 without evidence of intention to evade duty.

Analysis: The goods were returned by buyers, brought back for reconditioning and re-making under Rule 173H, and thereafter cleared without payment of duty in accordance with that rule. The alleged liability depended on whether the process amounted to manufacture under Chapter Note 2 of Chapter 29 of the Central Excise Tariff Act, 1985, which itself involved interpretation of the tariff note and did not establish deliberate evasion. The adjudicating authority also recorded that there was no suppression or misstatement. Penalty under Rule 173Q could not be imposed in such circumstances because the notice did not invoke any specific clause and the provision, as applied, required a violation with intention to evade duty.

Conclusion: Penalty under Rule 173Q was not sustainable, and the assessee succeeded.

Final Conclusion: The penalty component was set aside and the appeal succeeded with consequential relief.

Ratio Decidendi: A penalty provision requiring specific contravention cannot be invoked unless the assessee is put on notice of the exact clause breached and the material shows the requisite intention to evade duty.

---