Penalty requires a clear statutory basis in the notice; vague reference to the rule could not sustain the levy.

Penalty under the Central Excise Rules could not be sustained because the show cause notice did not clearly specify the statutory provision authorising the levy. A vague or incomplete reference in the notice was insufficient to found a penalty demand, and the notice's failure to identify a distinct enabling basis meant the Department's claim could not be upheld. The assessee succeeded on the penalty issue.

---

---

Issues: Whether penalty could be sustained when the show cause notice did not contain a specific statutory provision authorising the levy of penalty.

Analysis: The notice relied upon Rule 173Q of the Central Excise Rules, 1944, but did not specify a distinct enabling provision for penalty. The legal position applied was that a penalty demand must be founded on a clear and specific statutory basis in the notice itself; a vague or incomplete reference is not enough to sustain the levy. Since the notice lacked such specificity, the Department's claim for penalty could not be upheld.

Conclusion: The penalty was not legally sustainable and the assessee succeeded on the issue.

---