Penalty under Central Excise rules set aside where duty was paid before notice and no wilful suppression was found.

Penalty under Rule 173-Q of the Central Excise Rules, 1944 was held unsustainable where the short-paid duty had already been paid before the show cause notice, and the assessments were stated to be provisional under Rule 9B. The Board found no mala fide intention or wilful suppression, noting that the revised price lists and the resulting recalculation of duty had been acted upon before coercive proceedings began. On those facts, the basis for penal action was negatived and the penalty was set aside.

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Issues: Whether penalty under Rule 173-Q of the Central Excise Rules, 1944 was justified when the assessee had paid the short-paid duty before the show cause notice and the assessments were stated to be provisional under Rule 9B of the Central Excise Rules, 1944.

Analysis: The record showed that the duty demanded had already been paid before initiation of the show cause proceedings. On that basis, no mala fide intention or wilful suppression was found against the assessee. The Board accepted that the revised price lists and consequential recalculation of duty were acted upon by the assessee before coercive proceedings commenced, which negatived the basis for penal action.

Conclusion: Penalty under Rule 173-Q of the Central Excise Rules, 1944 was not sustainable and was set aside.

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