Penalty notice specificity and quantum reduction in excise contraventions where the assessee knew the basis of penalty

Redemption fine on excess goods and goods found in a truck was held excessive on the facts and reduced from Rs. 5 lakhs to Rs. 3,50,000. The penalty under Rule 173Q was not treated as void merely because the precise sub-clause was not specified, since the show cause notice clearly alleged contravention of enumerated excise rules and the assessee knew the penal basis. However, the penalty was also considered excessive and was reduced from Rs. 3 lakhs to Rs. 1,50,000. The operative principle is that clear notice of the alleged contravention can sustain penalty in principle, while quantum may still be moderated on the circumstances.

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Issues: (i) whether the redemption fine imposed on the excess goods and the goods found in the truck deserved reduction; (ii) whether the penalty under Rule 173Q was unsustainable for want of specification of the sub-clause.

Issue (i): Whether the redemption fine imposed on the excess goods and the goods found in the truck deserved reduction.

Analysis: The appeal was confined to the quantum of redemption fine and penalty. Considering the duty involved and the overall circumstances, the amount of redemption fine was found to be excessive. The goods-related findings were not disturbed, but the quantum of fine was moderated in the interest of justice.

Conclusion: The redemption fine was reduced from Rs. 5 lakhs to Rs. 3,50,000/-, in favour of the assessee.

Issue (ii): Whether the penalty under Rule 173Q was unsustainable for want of specification of the sub-clause.

Analysis: The assessee relied on the principle that penalty cannot stand where the exact sub-clause is not indicated. The Court distinguished that position on the facts because the show cause notice had specifically proposed penalty for contravention of several enumerated central excise rules, and the assessee was aware of the basis of the proposed penalty. However, the penalty amount was considered excessive on the facts and was reduced.

Conclusion: The penalty under Rule 173Q was upheld in principle, but reduced from Rs. 3 lakhs to Rs. 1,50,000/-, against the assessee on the validity issue and in favour of the assessee on quantum.

Final Conclusion: The impugned order was substantially sustained, but the monetary liabilities were moderated by reducing both the redemption fine and the penalty.

Ratio Decidendi: Where the show cause notice clearly alleges contravention of specified excise rules and the assessee is made aware of the penal basis, omission to mention the precise sub-clause does not by itself vitiate the penalty, though the quantum may still be reduced on the facts.

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