Specific contravention and statutory ingredients are essential before excise penalties can be imposed under Rules 173Q and 209A.

Penalty under Rule 173Q of the Central Excise Rules, 1944 cannot be sustained where the show-cause notice does not specify the exact clause allegedly contravened and the record records no finding of misdeclaration or suppression; the penalty was set aside. Penalty under Rule 209A also requires a clear finding that the person acquired, transported, removed, concealed, sold, purchased, or otherwise physically dealt with excisable goods with the requisite knowledge or reason to believe; a mere role in managing company affairs is insufficient, so that penalty was also set aside. Both penalties were deleted.

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Issues: (i) whether the penalty imposed on the assessee under Rule 173Q of the Central Excise Rules, 1944, could be sustained when the case was found not to involve misdeclaration or suppression and the show-cause notice did not specify the particular clause invoked; (ii) whether the penalty imposed on the Managing Director under Rule 209A of the Central Excise Rules, 1944, could stand in the absence of a finding that he had physically dealt with excisable goods in the manner contemplated by the rule.

Issue (i): whether the penalty imposed on the assessee under Rule 173Q of the Central Excise Rules, 1944, could be sustained when the case was found not to involve misdeclaration or suppression and the show-cause notice did not specify the particular clause invoked.

Analysis: The remand was confined to re-quantification of duty and did not authorise imposition of penalty. The Commissioner had also accepted that there was no misdeclaration or suppression, yet imposed penalty for alleged evasion without recording any clear finding as to the basis of such evasion. In addition, the show-cause notice contained only a general reference to Rule 173Q and did not particularise the clause alleged to have been contravened. A penalty under Rule 173Q requires the assessee to be put on notice of the exact contravention and the specific clause relied upon.

Conclusion: The penalty under Rule 173Q was not sustainable and was set aside in favour of the assessee.

Issue (ii): whether the penalty imposed on the Managing Director under Rule 209A of the Central Excise Rules, 1944, could stand in the absence of a finding that he had physically dealt with excisable goods in the manner contemplated by the rule.

Analysis: Penalty under Rule 209A requires a finding that the person either acquired possession of excisable goods or was concerned in transporting, removing, depositing, keeping, concealing, selling, purchasing, or otherwise physically dealing with such goods, with knowledge or reason to believe that they were liable to confiscation. The impugned order relied only on the statement that he was concerned with managing the affairs of the company, which was insufficient. No finding was recorded that he dealt with excisable goods in any of the modes covered by the rule.

Conclusion: The penalty under Rule 209A was not sustainable and was set aside in favour of the appellant.

Final Conclusion: Both penalties were annulled, and the appeals succeeded to the extent of deletion of the penalties.

Ratio Decidendi: A penalty under Rule 173Q or Rule 209A cannot be sustained unless the exact contravention is specifically alleged and the requisite statutory ingredients are supported by a clear finding on the relevant acts and mental element.

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