Trade notice breach cannot sustain penalty where Modvat credit was allowed and no statutory rule carried penal force.

A trade notice or departmental circular issued under Rule 233 could not, by itself, support penalty under Rule 173Q when Modvat credit had already been allowed and the only alleged default was non-observance of procedural conditions. The Tribunal held that the trade notice did not have the force of a statutory rule carrying penal consequences, and reliance on Rule 173H did not change that position. As the penalty was founded solely on breach of Trade Notice No. 20/93, it lacked legal support and was set aside.

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Issues: Whether penalty could be sustained for non-compliance with a trade notice when Modvat credit had been allowed and the alleged breach was only of procedural conditions.

Analysis: The Tribunal held that trade circulars issued by the Commissionerate under Rule 233 could not be equated with statutory rules carrying penal consequences under Rule 173Q. Since the penalty rested solely on alleged non-observance of Trade Notice No. 20/93 and the credit itself had been allowed, the penalty lacked legal support. The reliance placed on Rule 173H did not alter the position, as the trade notice did not acquire the force of a penal rule.

Conclusion: The penalty was unsustainable and was set aside.

Final Conclusion: The assessee succeeded, and the impugned penalty order was annulled.

Ratio Decidendi: A trade notice or circular, by itself, cannot attract penal consequences under Rule 173Q unless its breach is backed by a statutory rule having binding force.

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