Penalty for duty evasion on captive kimam clearances upheld despite claimed bona fide belief of non-dutiability.

Penalty under Rule 173Q(1)(d) of the Central Excise Rules, 1944 was sustained because the non-payment of duty on captive clearances of kimam was found to involve contravention with intent to evade duty. The plea of bona fide belief that kimam was not dutiable was rejected, as excisability had already been upheld and the record showed suppression, including operation of unregistered and unlicensed manufacturing units despite business experience and knowledge of comparable licensed traders. The claimed absence of intent to evade was therefore not accepted, and the penalty was held to be properly imposed.

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Issues: Whether penalty under Rule 173Q(1)(d) of the Central Excise Rules, 1944 was sustainable for non-payment of duty on captive clearances of kimam.

Analysis: Penalty under Rule 173Q(1)(d) required contravention of the rules with intent to evade duty. The plea that the non-payment arose from a bona fide impression that kimam was not dutiable was rejected because the higher court had already upheld excisability, the applicability of the extended period under the proviso to Section 11A(1) of the Central Excise Act, 1944, and the existence of suppression. The record showed that the units manufacturing kimam were not registered or licensed despite the assessee's business experience and knowledge of comparable licensed traders. The claimed bona fides and absence of intent to evade were therefore not accepted.

Conclusion: The penalty under Rule 173Q(1)(d) was rightly imposed and was not excessive.

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