Penalty under Central Excise rules requires clear notice and proof of intent; mechanical penalty was waived.

Penalty under Rule 173Q of the Central Excise Rules, 1944 was not sustained because the record showed no intention to evade duty, the duty demand was deposited when directed during the appeal, and the show cause notice did not clearly place the assessee on notice of the penal basis. The principle applied was that penalty cannot be imposed mechanically and must be assessed in light of the total facts and circumstances, with mens rea relevant where required by the statute. On those facts, the penalty was waived.

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Issues: Whether penalty under Rule 173Q of the Central Excise Rules, 1944 was sustainable when the duty had been deposited during the pendency of the appeal, the show cause notice did not clearly put the appellant to notice of the penal clause, and there was no finding of intent to evade duty.

Analysis: The penalty provision was held to require more than the mere existence of a default. The record did not show any intention to evade duty, and the duty demand was deposited when directed by the Tribunal. The appellant was also not specifically informed of the penal basis in the notice so as to meet the charge effectively. The decision applied the settled principle that penalty is not to be imposed mechanically and must be judged in the light of the totality of facts and circumstances, with mens rea being relevant where the statute so requires.

Conclusion: The penalty was waived and not sustained against the assessee.

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