Penalty unwarranted after differential duty payment and no intent to evade, with Modvat credit considerations supporting relief.

Penalty under excise law was found unwarranted where the assessee had already paid the differential duty, did not dispute the classification finding that the product was an intermediate, and relied on the absence of intention to evade duty. The dispute was confined to penalty, and the additional factor that the assessee would otherwise have been entitled to Modvat credit on the duty paid supported the conclusion that penalty should not be imposed. Penalty was set aside in favour of the assessee.

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Issues: Whether penalty was sustainable when the assessee had paid the differential duty and claimed absence of intention to evade duty.

Analysis: The assessee did not contest the finding that the product was an intermediate and the differential duty had already been paid. The dispute was confined to penalty. In the circumstances, and in view of the plea that the assessee would otherwise have been entitled to Modvat credit on the duty paid, the imposition of penalty was held to be unwarranted.

Conclusion: Penalty was set aside in favour of the assessee.

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