Financial hardship is no defence to excise duty default, though absence of mala fide may justify penalty reduction.

Financial hardship did not excuse non-payment of central excise duty on cleared goods, and the unpaid duty and interest were confirmed because the assessee had not discharged the liability on the clearances in question. However, as the clearances were properly recorded and there was no material showing deliberate evasion, absence of mala fide justified only reduction, not deletion, of penalty. The penalty was accordingly reduced, while the duty, interest, and small duty demands were upheld.

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Issues: (i) Whether non-payment of central excise duty on clearances for October 2003, pleaded to be due to financial difficulty and absence of mala fide intention, warranted deletion of penalty or only reduction of penalty. (ii) Whether the duty and interest on the unpaid clearances and the small duty amounts were liable to be confirmed.

Issue (i): Whether non-payment of central excise duty on clearances for October 2003, pleaded to be due to financial difficulty and absence of mala fide intention, warranted deletion of penalty or only reduction of penalty.

Analysis: The duty for the relevant month remained unpaid even after a substantial period. Since the goods were cleared under statutory records and duty-paying documents, the amount was treated as part of the clearance value and the duty was presumed to have been recovered from buyers. Financial difficulty was therefore not accepted as a valid excuse for non-deposit of duty. At the same time, because the clearances were properly recorded and there was no material indicating deliberate evasion, the element of mala fide was not accepted.

Conclusion: Penalty was not deleted, but it was reduced to Rs. 2,00,000/-.

Issue (ii): Whether the duty and interest on the unpaid clearances and the small duty amounts were liable to be confirmed.

Analysis: The unpaid duty and interest were held recoverable because the appellant had not discharged the tax liability on the clearances in question. The small duty amounts were not separately contested and were upheld.

Conclusion: The duty, interest, and the small duty demands were confirmed.

Final Conclusion: The appeal succeeded only to the limited extent of reduction of penalty, while the duty and interest liabilities were maintained.

Ratio Decidendi: Financial hardship does not by itself excuse non-payment of excise duty on cleared goods, but absence of mala fide may justify reduction rather than deletion of penalty.

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