Mandatory intimation under Rule 173GG is a precondition; without it, the fiscal procedure and penalty cannot be sustained.

Rule 173GG could not be invoked unless the mandatory intimation to the Department had first been given. In its absence, the assessee could not be treated as having validly adopted that procedure and remained subject to the ordinary duty-payment mechanism under Rule 173G. The Tribunal held that the notice and demand based on Rule 173GG lacked the necessary foundation, so the proceedings under that rule were not sustainable. The reduced penalty was left undisturbed, and the Revenue's request for restoration of the higher penalty was rejected.

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Issues: Whether the assessee could be subjected to the procedure, interest and penalty under Rule 173GG in the absence of the mandatory intimation required for availing the facility, and whether the Revenue was entitled to restoration of the higher penalty.

Analysis: Rule 173GG required specific intimation to the Department before the facility could be utilised. In the absence of such intimation, the assessee could not be treated as having validly adopted that procedure and would otherwise remain bound by the ordinary duty-payment procedure under Rule 173G. The notice and consequential demand proceeded on the footing that Rule 173GG applied, although the foundational requirement for its invocation was not satisfied. On that basis, the Tribunal held that the proceedings under Rule 173GG could not be sustained.

Conclusion: The assessee was not liable to be proceeded against under Rule 173GG for the period in question, and the reduction of penalty was not to be interfered with. The assessee's appeal was allowed and the Revenue's appeal was dismissed.

Final Conclusion: The common order relieved the assessee from the Rule 173GG-based demand structure and left the reduced penalty undisturbed, with no restoration of the Revenue's higher penalty claim.

Ratio Decidendi: A procedure or penal consequence under a fiscal rule cannot be invoked unless the statutory precondition for availing that rule is first satisfied.

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