Penalty under Central Excise rules was deleted where concession was withdrawn with approval and no intent to evade duty was shown.

Penalty under Rule 173Q(1) of the Central Excise Rules, 1944 was held unsustainable where the assessee discontinued the concessional benefit of Notification No. 9/99-C.Ex. with the approval of the excise authorities before the financial year ended. Once permission was granted, the discontinuance did not amount to breach of the notification conditions. The provision also required contravention with intent to evade duty, and no such intent was alleged. The absence of any demand for differential duty for the relevant period further supported deletion of the penalty, which was upheld in favour of the assessee.

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Issues: Whether penalty under Rule 173Q(1) of the Central Excise Rules, 1944 was leviable when the assessee discontinued the benefit of Notification No. 9/99-C.Ex. with the approval of the excise authorities before the end of the financial year and no differential duty was demanded.

Analysis: The assessee had initially cleared goods at a concessional rate under the notification, but later gave up the benefit after obtaining permission from the excise authorities. Once such permission was granted, discontinuance of the concession could not amount to breach of the notification conditions. Penalty under Rule 173Q(1) was also not attracted because that provision contemplates contravention with intent to evade payment of duty, and the revenue did not allege any such intent. It was further relevant that no differential duty had been demanded for the period in question.

Conclusion: The penalty was not sustainable and the deletion of the penalty by the Tribunal was ; the issue was answered in favour of the assessee.

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