Penalty for inadvertent challan error fails where duty was deposited and no intent to evade duty was proved.

Penalty under Rule 173Q(d) of the Central Excise Rules, 1944 was unsustainable because the contravention was not shown to have been committed with intent to evade duty. The duty amounts had been deposited in the treasury, the wrong duty heads in the challans were attributed to an inadvertent mistake, and the record did not establish any mala fide intention. Prompt explanation of the error and the fact that departmental officers had signed the return also supported the absence of evasion. A genuine irregularity, without proof of intent to evade, was held insufficient to justify penalty, and the assessee succeeded.

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Issues: Whether penalty under Rule 173Q of the Central Excise Rules, 1944 was sustainable when the duty amounts were deposited but the challans mentioned the wrong duty heads by mistake and there was no proof of intent to evade duty.

Analysis: Penalty under Rule 173Q(d) is attracted only where contravention is committed with intent to evade payment of duty. The deposits were made in the treasury, the mistake in describing the challans was inadvertent, and the record did not establish any mala fide intention. The circumstance that the departmental officers had signed the return and that the appellants promptly explained the mistake also supported the absence of evasion. A mere irregularity or genuine mistake, without proof of intent to evade, was held insufficient to sustain penalty.

Conclusion: The penalty was not sustainable and the impugned order was set aside in favour of the assessee.

Ratio Decidendi: Penalty under Rule 173Q of the Central Excise Rules, 1944 cannot be imposed unless contravention is proved to have been committed with intent to evade duty.

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