Rectification of mistake can correct an order based on an apparent factual error and restore penalty relief accordingly.

A rectification of mistake application was held maintainable where the earlier order had set aside penalty on an incorrect factual premise. The tribunal found that the assumption that the appellant had not utilised inadmissible credit was contradicted by the Revenue's material, which showed the credit balance was much lower than the disputed amount during the relevant dates. As the factual foundation of the earlier relief was demonstrably from the record, the order was modified and penalty was confirmed to the extent of Rs. 50,000.

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Issues: Whether the rectification of mistake application was maintainable for correcting the earlier order setting aside the penalty on an incorrect factual premise, and whether the penalty deserved to be restored to the extent of Rs. 50,000.

Analysis: The earlier relief from penalty had been granted on the basis that the appellant had not utilised the inadmissible credit. On the material placed by the Revenue, that factual premise was found to be incorrect, as the credit balances in the appellant's account were shown to be much lower than the disputed amount during the relevant dates. The mistake in the factual foundation of the earlier order was therefore established.

Conclusion: The rectification application was accepted and the earlier final order was modified by confirming penalty to the extent of Rs. 50,000.

Ratio Decidendi: An order passed on an incorrect factual premise may be rectified where the mistake is apparent from the record, and the relief granted on that basis can be modified accordingly.

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