Central excise penalty not justified where duty cheques were realised and no intention to evade duty was found.

Penalty for delayed central excise duty payment was not justified where cheques issued towards duty were later realised and were not dishonoured. The relevant date for payment was treated as the date of presentation of the cheques, as duty had been reflected through the personal ledger account on that basis. The Commissioner also found that the lapse amounted only to delayed payment, with no evasion or intention to evade duty. On that footing, the penal consequences under Rule 173Q of the Central Excise Rules, 1944 and Section 11AC of the Central Excise Act, 1944 were not attracted.

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Issues: Whether penalty under Rule 173Q of the Central Excise Rules, 1944 was sustainable where duty was paid through cheques that were later realised and the Commissioner found no intention to evade duty.

Analysis: The goods were cleared on the basis of entries made in the personal ledger account after presentation of cheques to the Department. The cheques were not dishonoured and were subsequently encashed by the Revenue. In such circumstances, the date of presentation of the cheque was treated as the relevant date for duty payment. The Commissioner had also recorded a finding that the lapse amounted only to delayed payment of duty and not evasion of duty or intention to evade duty, and therefore the extraordinary penal consequences under Section 11AC of the Central Excise Act, 1944 were not attracted.

Conclusion: Penalty was not justified and the assessees succeeded.

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