Excise duty quantification and Rule 173Q penalty: reduced demand upheld, but statutory interest and penalty were restored.

Excise duty quantification was examined on the basis that the department had relied only on a Superintendent's endorsed calculation without disclosing the computation method or basis to the assessee; on that footing, the reduced duty demand was upheld as properly accepted by the appellate authority. Interest was treated as a statutory liability and could not be deleted merely on the reasoning adopted below, so the setting aside of interest was reversed. Penalty under Rule 173Q was also restored because the provision covered wrong availment, utilisation, and retention of credit contrary to law, and the appellate authority had not addressed that legal position. The demand therefore survived only to the extent of the reduced quantum, with interest and penalty reinstated.

---

---

Issues: (i) whether the duty liability was correctly quantified at Rs. 3,22,731/- instead of Rs. 3,56,082/-; (ii) whether interest liability could be set aside; and (iii) whether penalty under Rule 173Q was sustainable.

Issue (i): Whether the duty liability was correctly quantified at Rs. 3,22,731/- instead of Rs. 3,56,082/-.

Analysis: The quantification adopted by the adjudicating authority was based only on the Superintendent's endorsement of calculations, without any examination of the method or basis of computation. The basis of the calculations was also not furnished to the assessee. In these circumstances, the lower appellate authority was justified in accepting the assessee's computation and reducing the demand.

Conclusion: The reduction of the duty liability to Rs. 3,22,731/- was upheld.

Issue (ii): Whether interest liability could be set aside.

Analysis: Interest was a statutory liability and could not have been deleted merely on the reasoning adopted by the appellate authority.

Conclusion: The setting aside of interest liability was unsustainable and was reversed.

Issue (iii): Whether penalty under Rule 173Q was sustainable.

Analysis: Rule 173Q covered not only wrong availment of credit but also wrong utilisation and retention of credit contrary to law. The appellate authority interfered with the penalty without addressing this legal position.

Conclusion: The penalty could not be deleted and the adjudicating authority's order was restored.

Final Conclusion: The demand was sustained only to the extent of the reduced quantum, while interest and penalty were reinstated in favour of the Revenue.

Ratio Decidendi: A quantified excise demand based merely on undisclosed computation by the department can be reduced where the assessee's computation is not shown to be unsupported, but statutory interest and penalty cannot be deleted without addressing the governing legal provisions.

---