Section 11D proceedings do not attract penalty under Section 11AC or Rule 173Q when no under-valuation duty demand is confirmed.

Penalty provisions under Section 11AC of the Central Excise Act, 1944 and Rule 173Q of the Central Excise Rules, 1944 were held inapplicable where the show cause notice and order in original were confined to confirmation and appropriation of amounts under Section 11D. The matter was not treated as one involving duty confirmation for under-valuation. On that reading, contravention of Section 11D did not attract the penal provisions invoked, and the penalty was held not sustainable and was set aside.

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Issues: Whether penalty could be imposed under Section 11AC of the Central Excise Act, 1944 or Rule 173Q of the Central Excise Rules, 1944 when the demand and appropriation were made under Section 11D of the Central Excise Act, 1944.

Analysis: The order in original was read with the show cause notice and was found to be confined to confirmation and appropriation of the amount under Section 11D of the Central Excise Act, 1944. The case was not one of duty confirmation on account of under-valuation. On that reading, the penal provisions under Section 11AC of the Central Excise Act, 1944 and Rule 173Q of the Central Excise Rules, 1944 were held to be inapplicable to a contravention of Section 11D.

Conclusion: Penalty was not sustainable and was set aside.

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