Rule 25 penalty requires proof of intent to evade duty; absence of clandestine removal evidence defeats the penalty.

Penalty under Rule 25 of the Central Excise Rules, 2001 is sustainable only where there is contravention of the rules or notifications with intent to evade duty. On stock verification, shortage of raw material and finished goods was found, but the record did not disclose tangible evidence of clandestine removal. Although duty was deposited during the proceedings, no contravention with intent to evade payment of duty was established. In the absence of the requisite intent, the penal provision could not be invoked, and the penalty was set aside.

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Issues: Whether penalty under Rule 25 of the Central Excise Rules, 2001 was sustainable in the absence of tangible evidence of clandestine removal and any contravention with intent to evade payment of duty.

Analysis: The shortage of raw material and finished goods was detected on stock verification, and the duty was deposited in the course of the proceedings. The record did not disclose tangible evidence of clandestine removal. Rule 25 permits penalty only where there is contravention of the rules or notifications with intent to evade duty. In the absence of such intent and in view of the finding that no contravention with intent to evade payment of duty was established, the penal provision could not be invoked.

Conclusion: The penalty under Rule 25 was not justified and was set aside.

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