Waiver of pre-deposit for penalty under Rule 173Q was granted where the penalty basis was inadequately reasoned.

Waiver of pre-deposit was justified where the assessee had already reversed the Cenvat or Modvat credit and discharged interest, and the penalty under Rule 173Q lacked specific reasoning and identification of the sub-clause invoked. Because the lower authorities had not recorded a clear basis for applying the penal provision, the appellant established a prima facie case at the stay stage. Recovery of the penalty was therefore stayed pending disposal of the appeal.

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Issues: Whether the appellant was entitled to waiver of pre-deposit of the penalty imposed under Rule 173Q of the Central Excise Rules, 1944 and stay of recovery pending appeal.

Analysis: The appellant had already reversed or paid the cenvat or modvat credit and also discharged the interest liability. The lower authorities had imposed penalty under Rule 173Q of the Central Excise Rules, 1944, but had not recorded any specific reasoning for invoking that penal provision. The rule requires notice of the specific sub-clause under which penalty is proposed, and the absence of such findings weakened the foundation for insisting on pre-deposit at the stay stage.

Conclusion: The appellant made out a prima facie case for waiver of pre-deposit, and the penalty recovery was stayed pending disposal of the appeal.

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