Strict construction of excise penalty rules bars penalty without mens rea or intent to evade duty.

Penalty under Rule 173Q of the Central Excise Rules, 1944 requires proof of a culpable element and must be strictly construed. On the facts recorded, there was no basis to infer intention to evade duty or any wilful conduct, so penal action was not sustainable. The penalty was therefore set aside in favour of the assessee.

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Issues: Whether penalty under Rule 173Q of the Central Excise Rules, 1944 was sustainable on the facts of the case.

Analysis: Penalty under Rule 173Q is penal in nature and is attracted only when the requisite culpable element is shown. On the facts recorded, there was no justification to infer any intention to evade duty or any wilful conduct warranting penal action.

Conclusion: Penalty under Rule 173Q was not justified and was set aside in favour of the assessee.

Ratio Decidendi: A penalty provision in central excise law must be strictly construed, and in the absence of mens rea or intention to evade duty, penalty under Rule 173Q cannot be sustained.

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