Self-removal excise duty must be backed by cleared credit; penalty upheld but reduced for excessiveness.

In self-removal excise procedure, an assessee must have an actually available account-current balance before clearing goods; debit against cheque deposits not yet cleared by the bank is insufficient. Clearance made during that intervening period is treated as unauthorised and without payment of duty, attracting penalty under Rule 173Q. The penalty was therefore upheld, but the Tribunal found the amount excessive when compared with a similar later offence and reduced the quantum on the facts.

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Issues: Whether penalty was warranted for clearing excisable goods against PLA credit taken on the strength of cheque deposits before their clearance by the bank, and whether the penalty required reduction.

Analysis: Under Rule 173G, an assessee proceeding under the self-removal procedure must maintain sufficient balance in the account-current to cover the duty due before removal of goods. The assessee took credit in the PLA on the basis of cheques deposited for duty without waiting for their clearance, and cleared goods during the intervening period when sufficient credit was not actually available. Such clearances were therefore treated as unauthorised and without payment of duty, justifying penalty under Rule 173Q. At the same time, the Tribunal considered the subsequent similar offence case and the lesser penalty imposed there, and found that the present penalty was excessive in comparison.

Conclusion: The imposition of penalty was upheld, but the quantum was reduced to Rs. 2.5 lakhs.

Ratio Decidendi: In self-removal excise procedure, duty must be debited only against actually available account-current balance before removal of goods, and clearance against unrealised cheque credits attracts penalty, though quantum may be moderated on the facts.

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