Clearance during declaration period under Rule 173B is not a contravention, so penalty cannot stand.

Where a first-time manufacturer commences production and the declaration under Rule 173B is filed or amended within the prescribed 30-day period, the rule does not prohibit clearance of the goods manufactured in that interval. The text states that once production is permitted, goods so produced cannot be denied clearance merely because the declaration has not yet been filed or amended within time. On that reasoning, no contravention of Rule 173B was established and penalty for such clearances was unsustainable; the impugned penalty order was set aside with consequential relief.

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Issues: Whether an assessee, after commencing production of excisable goods and before filing or amending the declaration within the prescribed period, can clear the goods so manufactured and whether penalty is sustainable for such clearances.

Analysis: The second proviso to Rule 173B(1) requires a first-time manufacturer to submit the declaration within 30 days of commencing production. Rule 173B(2) similarly permits a fresh declaration or amendment within 30 days where new goods are manufactured. The rule contains no restriction that goods manufactured during that period cannot be cleared. Once production is permitted, the goods so produced cannot be denied clearance merely because the declaration has not yet been filed or amended within the permitted time. On that basis, no contravention of Rule 173B was established.

Conclusion: The penalty was unsustainable and the issue was decided in favour of the assessee.

Final Conclusion: The impugned penalty order was set aside and the appeal was allowed with consequential relief.

Ratio Decidendi: Where a rule permits production subject to filing or amendment of declaration within a prescribed period, and the rule does not expressly prohibit clearance during that period, clearance cannot be treated as a contravention and penalty cannot be imposed on that basis.

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