Bona fide belief based on official certificate justified reduction of penalty, though the duty demand was confirmed.

Penalty equal to the duty was found unwarranted where the assessee acted on a certificate issued by the State power authorities and endorsed by Central Excise, and then corrected the credit entry once the exemption error was pointed out. The bona fide belief that the notification benefit was available weighed against imposition of the full penalty. The duty demand was confirmed, but the penalty was reduced from Rs. 32,091 to Rs. 10,000.

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Issues: Whether penalty equal to the amount of duty was justified in the circumstances, where the assessee acted on a certificate issued by the State authorities and corrected the credit entry upon being pointed out that the exemption was not available.

Analysis: The appeal related only to the quantum of penalty. The material had been supplied on the basis of a certificate issued by the Department of Power, West Bengal and endorsed by the Central Excise authorities. On these facts, the assessee claimed a bona fide belief that the exemption under the notification was available. Once the mistake was pointed out, the credit was adjusted in RG 23A Part-II. In these circumstances, the imposition of penalty equal to the duty amount was held to be unwarranted.

Conclusion: Penalty equal to the duty was not justified. The penalty was reduced from Rs. 32,091 to Rs. 10,000, while the duty demand was confirmed.

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