Penalty under Rule 173Q fails when the underlying duty demand is set aside, leaving no basis for penal liability.

Penalty under Rule 173Q could not be sustained once the duty demand had been dropped by the adjudicating authority. The settled principle applied was that, in the absence of any surviving duty liability, the connected penalty had no independent basis and could not survive. The penalty was therefore set aside, and the appeal was allowed with consequential relief to the appellant.

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Issues: Whether penalty could be sustained under Rule 173Q where the duty demand had been dropped.

Analysis: The duty demand had already been set aside by the adjudicating authority, leaving only the penalty imposed under Rule 173Q. The settled legal position applied was that in the absence of any duty demand, a penalty of this kind could not survive.

Conclusion: The penalty was unsustainable and was set aside. The appeal was allowed with consequential relief to the appellant.

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