Procedural lapse in duty payment mode alone does not justify confiscation or penalty when full duty is paid and no evasion exists.

Confiscation and penalty were not justified where the full excise duty on machinery had been paid through TR 6 challans before captive use, and the only lapse was non-compliance with the prescribed mode of duty debit. The payment was accepted as duty, not as short or deficient payment, and the procedural irregularity was capable of regularisation in the statutory records. In the absence of deliberate evasion, mala fides, or intention to evade duty, Rule 173Q penalty was not attracted. The duty entry was directed to be regularised, and confiscation and penal consequences were set aside.

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Issues: Whether confiscation of machinery and imposition of penalty were justified where duty had been paid through TR 6 challans before captive use and the alleged breach was only of the prescribed mode of duty debit.

Analysis: The duty payable on the machines was not disputed and the payments made through TR 6 challans were accepted as duty, not as a short or deficient payment. The irregularity lay only in the method of payment and debit, which was a procedural lapse capable of being regularised. Penalty under Rule 173Q was not attracted in the absence of a deliberate violation or any intention to evade duty, especially when the department had been informed before the machines were put to captive use.

Conclusion: Confiscation and penalty were set aside, and the duty payment was directed to be regularised in the statutory records.

Final Conclusion: Procedural non-compliance in the manner of duty payment, without duty evasion or mala fides, did not justify confiscation or penal consequences.

Ratio Decidendi: Penalty and confiscation under the excise rules are not sustainable for a merely procedural lapse in the mode of duty payment when the full duty has been paid and there is no intention to evade duty.

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