Bona fide belief in excise non-payment can justify reduction of penalty even when duty liability on clearances remains.

Penalty for non-payment of central excise duty was moderated where the assessee asserted a bona fide belief that exemption withdrawal had not come to its notice and that similarly placed manufacturers had also not paid duty. The record indicated systematic maintenance of production and sales accounts, and the demand was worked out from those accounts, supporting the plea of genuine belief. Although duty liability on the clearances was not disputed, the full penalty was found unwarranted and was reduced, while the duty demand and the balance of the order were upheld.

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Issues: Whether the penalty imposed for non-payment of central excise duty could be sustained in full where the assessee pleaded bona fide belief arising from unawareness of withdrawal of exemption.

Analysis: The assessee consistently maintained that duty was not paid because the withdrawal of exemption had not come to its notice and that similarly placed manufacturers in the region had also not paid duty. The remand direction required a categorical examination of this plea, but the adjudicating authority did not return a clear finding on it and instead confirmed the demand by invoking the extended period on the premise that ignorance of law was no excuse. The record showed that the assessee had maintained systematic accounts of production and sales and that the department had drawn the demand figures from those very accounts. In these circumstances, the plea of bona fide belief was found to have strong support, even though duty liability on the clearances themselves was not disputed.

Conclusion: The penalty was not justified in the full amount and was reduced to Rs. 10,000, while the duty demand and the remainder of the order were upheld.

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