Exemption taken under prevailing tribunal ruling cannot attract penalty or interest absent fraud, suppression, or wilful misstatement.

CESTAT held that no penalty was warranted where the assessee availed exemption on furnace oil and allied inputs in line with the Tribunal's earlier ruling in its own case, because it had followed the then-prevailing judicial view and not any later Supreme Court clarification. On the same facts, interest under Section 11AB was not recoverable because the statutory basis of fraud, suppression, collusion, or wilful misstatement was absent. The demand for penalty and interest therefore failed, and the assessee succeeded on the excise liability arising from the exemption claim.

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Issues: (i) whether penalty was imposable for availing exemption on furnace oil and allied inputs on the basis of the Tribunal's earlier decision in the assessee's own case; (ii) whether interest under Section 11AB was recoverable in the absence of fraud, suppression or wilful misstatement.

Issue (i): whether penalty was imposable for availing exemption on furnace oil and allied inputs on the basis of the Tribunal's earlier decision in the assessee's own case.

Analysis: The exemption had been taken by the assessee during the relevant period in accordance with the Tribunal's earlier ruling in its own matter, which treated furnace oil and similar inputs used for generation of steam in fertiliser manufacture as feed stock entitled to exemption. The position of law changed only after the Supreme Court later took a different view. Where the assessee followed the then-prevailing judicial view applicable to its own case, penal consequences under the excise rules were not warranted.

Conclusion: Penalty was not imposable and the finding is in favour of the assessee.

Issue (ii): whether interest under Section 11AB was recoverable in the absence of fraud, suppression or wilful misstatement.

Analysis: Interest under Section 11AB, for the relevant period, was linked to short payment or non-payment attributable to fraud, collusion, wilful misstatement or suppression of facts. Since the assessee availed the exemption on the strength of a favourable Tribunal decision in its own case, no fraudulent intent or suppression could be attributed. Accordingly, the statutory basis for demanding interest was not made out.

Conclusion: Interest was not recoverable and the finding is in favour of the assessee.

Final Conclusion: The demand of penalty and interest failed, and the appeals succeeded on the core dispute concerning consequential excise liability arising from the exemption claim.

Ratio Decidendi: An assessee who acts in accordance with a then-prevailing judicial ruling in its own case cannot be visited with penalty or interest in the absence of fraud, suppression or wilful misstatement.

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