Exemption notification non-compliance at clearance sustained penalty, though the penalty amount was reduced on appeal.

Clearance of goods without producing the certificate required by Notification No. 108/95-C.E. at the time of removal justified penal consequences under Rule 173Q, because exemption conditions were not complied with when duty liability arose. Subsequent production and acceptance of the certificate at the appellate stage cured the exemption benefit, but did not undo the earlier non-compliance. The clearance was therefore treated as having been made without payment of duty for want of fulfilment of the notification conditions, so penalty was leviable. However, the circumstances warranted interference with the penalty quantum, and the amount was reduced.

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Issues: Whether penalty under Rule 173Q was sustainable when the exemption notification condition was not complied with at the time of clearance, and whether the penalty amount required reduction.

Analysis: The goods were cleared without producing the certificate mandated by Notification No. 108/95-C.E. at the time of removal. The subsequent production and acceptance of the certificate at the appellate stage cured the benefit of exemption, but did not erase the earlier non-compliance. Since the clearance was treated as without payment of duty in the absence of compliance with the notification conditions, penal consequences followed. At the same time, the circumstances justified interference with the quantum of penalty.

Conclusion: Penalty was held to be leviable, but the amount was reduced.

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