Procedural record-keeping lapses attract only limited penalty where no duty evasion is found

Absence of duty evasion and only minor defects in record maintenance did not justify invoking the harsher penal provision. The assessee's explanation was accepted, and the breach was confined to non-maintenance of the prescribed register and failure to give D-III intimation. On that basis, the matter fell only within the procedural penalty provision, and the penalty could be sustained solely under Rule 226, subject to its limited maximum. Rule 173Q was held inapplicable where the violation was procedural and no duty evasion was found.

---

---

Issues: Whether, in the absence of duty evasion and in view of only minor discrepancies in maintenance of records and intimation, penalty could be sustained under Rule 173Q, or whether the matter was confined to Rule 226 with its prescribed maximum penalty.

Analysis: The explanation of the assessee was accepted and there was a categorical finding that no duty evasion had occurred. On those facts, the harsher penal provision could not be invoked merely for defects in record maintenance. The breach was limited to non-maintenance of the prescribed register and absence of D-III intimation, which attracted only the procedural penalty contemplated by Rule 226.

Conclusion: Rule 173Q was inapplicable. Penalty was sustainable only under Rule 226 and could not exceed Rs. 2,000.

---