Penalty cannot survive once export proof is accepted and the duty demand is dropped, leaving no basis for penal action.

Penalty could not be sustained where the duty demand had been dropped and the assessee's proof of export had been accepted. The appellate authority treated the export evidence as sufficient to negate the basis for penalty, and held that continuing penal action on those facts was unjustified. The argument that this approach would create an adverse precedent was rejected. The penalty order was therefore held unsustainable and the Revenue's challenge failed.

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Issues: Whether the penalty could be sustained when the demand of duty had been dropped and the authorities had accepted proof of export.

Analysis: The appellate authority found that the assessee had produced proof of export and that, once the duty was not demanded on those facts, there was little justification for continuing the penalty. The challenge that such a view would create an adverse precedent was rejected.

Conclusion: The penalty order was not sustainable and the Revenue's appeal failed.

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