Clandestine clearance penalty under Rule 173Q sustained, with proportionate reduction upheld after duty recomputation.

Clandestine clearance of air conditioners without payment of duty supported the sustainment of penalty under Rule 173Q of the Central Excise Rules, 1944. The duty liability had already been recomputed after de novo adjudication and that computation was not challenged, so the surviving dispute was confined to penalty. Because the evasion was detected on inspection and the goods were cleared beyond the prescribed limit without duty payment, a proportionate reduction in penalty linked to the reduced duty demand was treated as justified, and there was no basis to delete the penalty entirely. The assessee's challenge failed and the reduced penalty was maintained.

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Issues: Whether penalty under Rule 173Q of the Central Excise Rules, 1944 was liable to be set aside or further reduced in a case involving clandestine clearance of air conditioners without payment of duty.

Analysis: The duty liability had already been recomputed after de novo adjudication and the computation was not challenged. The only surviving dispute concerned penalty. The findings recorded that the goods were cleared without payment of duty after crossing the prescribed limit and the duty evasion came to light on inspection of the unit. In those circumstances, the reduction of penalty by the appellate authority, in proportion to the reduced duty liability, was held to be justified and no basis was found to delete the penalty altogether.

Conclusion: The penalty under Rule 173Q was upheld and the assessee's challenge failed.

Final Conclusion: The order of the appellate authority was sustained, resulting in dismissal of the appeal and confirmation of the reduced penalty.

Ratio Decidendi: Where clandestine clearance without payment of duty is established, penalty under Rule 173Q is sustainable, and a proportionate reduction in penalty linked to a reduced duty demand does not warrant interference absent any legal infirmity.

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