Bona fide reliance on prevailing Tribunal view defeats Rule 209A penalty for alleged excise contravention.

Penalty under Rule 209A of the Central Excise Rules, 1944 was held unsustainable where the assessee entered into the transaction at a time when the classification and exemption issue had not been finally settled and the Tribunal had consistently taken a view favourable to assessees. Bona fide reliance on that prevailing legal position meant the conduct could not be treated as deliberate contravention. The penalty was therefore set aside.

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Issues: Whether penalty under Rule 209A of the Central Excise Rules, 1944 was sustainable against the appellant company when, at the time of the transaction, the Tribunal had consistently taken a view favourable to assessees on the classification and exemption issue.

Analysis: The contract was entered into in 1991, when the issue whether the wooden furniture was entitled to exemption as handicraft was not finally settled. The Tribunal had earlier taken a view in favour of exemption, and the later Supreme Court ruling only declared the correct position of law. In the circumstances, the appellant's conduct could not be treated as deliberate contravention attracting penal consequences. Following the principle that an assessee cannot be penalised for adopting a view repeatedly accepted by the Tribunal, penalty was held to be unwarranted.

Conclusion: The penalty under Rule 209A was not sustainable and was set aside in favour of the appellant.

Ratio Decidendi: Where the assessee acts on a legal position consistently accepted by the Tribunal, bona fide reliance on that prevailing view negates the basis for penalty under Rule 209A of the Central Excise Rules, 1944.

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