Penalty for unauthorised excise removals upheld where goods were cleared without duty and finished stock was unaccounted

Penalty under Rule 173Q(1) of the Central Excise Rules, 1944 was held sustainable where excisable goods were removed without duty payment and finished goods were left unaccounted in factory records; prior payment of duty before the show cause notice did not by itself bar the penalty, though the quantum was reduced. Penalty under Rule 209A was also sustained against the director because his statement showed knowledge of the unauthorised removals and sufficient material for abetment of the contravention; this penalty too was reduced in amount. The duty demand was left undisturbed, and the ruling affirms that such Rule-based penalties can apply independently of later duty payment.

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Issues: (i) Whether penalty under Rule 173Q(1) of the Central Excise Rules, 1944 was leviable for removal of goods without payment of duty and non-accountal of finished goods. (ii) Whether penalty under Rule 209A of the Central Excise Rules, 1944 was leviable on the director who was aware of the removals without duty payment.

Issue (i): Penalty was imposed because the goods were found removed without duty payment and certain finished goods were found unaccounted in the factory records. The cited authorities on Section 11AC were distinguished because the present case involved penalties under the Central Excise Rules and the contravention had already been detected before payment of duty.

Conclusion: Penalty under Rule 173Q(1) was sustainable, but was reduced in quantum to Rs. 15,000/-.

Issue (ii): The director's statement showed awareness of the removal of excisable goods without compliance with excise formalities. On that basis, individual liability for abetment and knowledge of the contravention was made out.

Conclusion: Penalty under Rule 209A was sustainable, but was reduced in quantum to Rs. 10,000/-.

Final Conclusion: The duty demand was not interfered with, while the penalties on the company and the director were upheld in principle and reduced.

Ratio Decidendi: Where goods are removed without duty payment and finished goods are left unaccounted, penalties under the Central Excise Rules are leviable, and prior payment of duty before the show cause notice does not by itself bar such penalties.

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