Rule 173Q penalty cap interpreted as a maximum only, allowing reduction below Rs. 5,000

Rule 173Q of the Central Excise Rules, 1944 was read on its plain wording as fixing only the upper limit of penalty for contravention, namely not exceeding three times the value of the excisable goods or Rs. 5,000, whichever is greater. The provision was therefore treated as not creating a statutory minimum penalty of Rs. 5,000. On that interpretation, the Commissioner (Appeals) was entitled to reduce the penalty below Rs. 5,000, and the Revenue's contrary contention was rejected.

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Issues: Whether Rule 173Q of the Central Excise Rules, 1944 prescribes a minimum penalty of Rs. 5,000 or only sets the maximum penalty for contravention.

Analysis: Rule 173Q was construed on its plain language, which states that the manufacturer shall be liable to a penalty not exceeding three times the value of the excisable goods or Rs. 5,000, whichever is greater. On that wording, the provision was held to indicate only the upper limit of penalty and not a statutory minimum. The Revenue's contention that the Commissioner (Appeals) could not reduce the penalty below Rs. 5,000 was therefore rejected.

Conclusion: Rule 173Q does not prescribe a minimum penalty of Rs. 5,000; it prescribes only the maximum penalty, and the reduction of penalty by the Commissioner (Appeals) was upheld.

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