No penalty for stock discrepancy absent proof of clandestine removal or intent to evade duty

Penalty under Rule 173Q of the Central Excise Rules, 1944 was held unsustainable where the stock/accounting discrepancy did not show any deliberate attempt to evade duty. The appellate finding recorded that the goods were found in the bonded store room and that there was no direct or circumstantial evidence of clandestine removal or ulterior motive in the non-accountal. In that factual setting, the foundation for penalty ceased to exist, and the impugned order was set aside in favour of the assessee.

---

---

Issues: Whether the penalty imposed under Rule 173Q of the Central Excise Rules, 1944 was sustainable when the appellate finding recorded no evidence of clandestine removal and no ulterior motive in the non-accountal of the goods.

Analysis: The appellate finding accepted that the discrepancy in stock/accounting did not establish any deliberate attempt to evade duty, that the goods were found in the bonded store room, and that there was no direct or circumstantial evidence of clandestine removal. In that factual setting, the basis for sustaining the penalty under Rule 173Q ceased to exist.

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

---