Central Excise penalty reference upheld where Rule 173Q and Rule 209A independently supported the Tribunal's order

The Himachal Pradesh High Court considered whether questions of law should be referred on the validity of penalties under Rule 173Q and Rule 209A of the Central Excise Rules, 1944. It noted that although the Tribunal referred to Sections 11AB and 11AC of the Central Excise Act, 1944, the penalty could still be sustained under Rule 173Q, since a wrong or incomplete reference to the source of power does not invalidate an otherwise authorised order. The Court also accepted the Tribunal's finding that the Managing Director was involved in evasion and liable under Rule 209A, and held that prior offence and leniency considerations did not justify deletion of penalty. It directed reference of the questions of law.

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Issues: Whether the Tribunal should be directed to state the case and refer the questions of law arising from its order, particularly on the applicability of Rule 173Q of the Central Excise Rules, 1944 and the penalty on the Managing Director under Rule 209A of the Central Excise Rules, 1944.

Analysis: The Tribunal had proceeded on the basis that Sections 11AB and 11AC of the Central Excise Act, 1944 were introduced later and therefore could not support the levy of interest and penalty for the relevant period. The order, however, also invoked Rule 173Q of the Central Excise Rules, 1944, which independently empowered the imposition of penalty up to three times the value of the goods. The Court held that where an order can be sustained from a proper source of power, a wrong or incomplete reference to a provision does not invalidate it. On the Managing Director's penalty, the Tribunal itself had found that he was a party to evasion and liable to penalty under Rule 209A of the Central Excise Rules, 1944, and the plea of leniency based on an earlier offence did not justify complete deletion of penalty.

Conclusion: The Court directed the Tribunal to refer the questions of law to the Court and allowed the reference petition.

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