Small Scale Exemption disputes can defeat penalty where no duty is payable on the goods and pre-deposit is waived.

Penalty under Rule 173Q and Rule 209 of the Central Excise Rules, 1944 was challenged on the basis that the applicants were entitled to Small Scale Exemption and no duty was payable on the goods. On the record, the tribunal noted that the penalty provisions were invoked in relation to excisable goods on which duty was payable, and that factual basis was not made out. Waiver of pre-deposit was therefore granted and recovery of the penalty was stayed pending disposal of the appeal.

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Issues: Whether waiver of pre-deposit of penalty and stay of recovery were justified where the applicants claimed the benefit of Small Scale Exemption and no duty was payable on the excisable goods.

Analysis: The penalty had been imposed under Rule 173Q and Rule 209 of the Central Excise Rules, 1944. The applicants were availing Small Scale Exemption, and the record indicated that no duty was payable on the goods in question. Since the provisions invoked contemplated penalty in relation to excisable goods on which duty was payable, the basis for imposing penalty was not made out on the facts noted in the record.

Conclusion: The waiver of pre-deposit was granted and recovery of the penalty was stayed till disposal of the appeal.

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