Penalty under Rule 173Q fails where no duty evasion is finally established and the finding remains unchallenged.

Penalty under Rule 173Q of the Central Excise Rules, 1944 could not be sustained where the underlying duty demand had been dropped on an unchallenged finding that the evidence did not establish duty evasion. Because the Revenue filed no appeal or cross-objection against that finding, the absence of duty evasion attained finality. Rule 173Q applied only where there was a contravention with intent to evade duty, and that condition precedent was not met on the final record. The penalty was therefore set aside.

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Issues: Whether penalty under Rule 173Q of the Central Excise Rules, 1944 was sustainable when the demand for duty had been dropped on an unchallenged finding that there was no duty evasion.

Analysis: The demand for duty had been dropped by the Collector on the finding that the evidence did not establish duty evasion, and no appeal or cross-objection had been filed by the Revenue against that finding. In that situation, the finding that there was no duty evasion had attained finality. Rule 173Q could be invoked only where a manufacturer contravened the rules with intent to evade payment of duty. On the final finding available on record, the condition precedent for penalty was absent, and the penalty could not be sustained.

Conclusion: Penalty under Rule 173Q was not justified and was set aside.

Ratio Decidendi: A penalty provision requiring contravention with intent to evade duty cannot be invoked where the final, unchallenged finding is that no duty evasion is established.

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