Penalty for misdeclaration requires proof of collusion; absent evidence of connivance, relief was upheld.

Penalty for alleged misdeclaration could not be sustained where the assessee paid duty on the value declared by the trader under the notified procedure, and the record showed no basis to infer knowledge of a wilful misdeclaration or any connivance. In the absence of evidence of collusion between the assessee and the trader, the essential foundation for penalty was missing. The order dropping the penalty was therefore upheld and the department's challenge failed.

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Issues: Whether penalty was sustainable against the assessee for alleged collusion with the trader in filing a declaration of value for duty payment under the notified procedure.

Analysis: The assessee had paid duty on the value declared by the trader under the procedure prescribed by Notification No. 27/92-C.E. (N.T.). The record did not show that the assessee had any means of knowing that the trader had wilfully misdeclared the value, and no material was brought on record to establish connivance or collusion between the assessee and the trader. In the absence of such evidence, the basis for imposing penalty was not made out.

Conclusion: The penalty was not sustainable and the assessee was entitled to relief.

Final Conclusion: The department's appeal failed, and the order dropping the penalty was maintained.

Ratio Decidendi: Penalty for misdeclaration cannot be sustained unless there is evidence showing that the assessee colluded or connived in the wrongful declaration.

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