Exemption notification misreading sustained duty demand but led to reduction of penalty for lack of deliberate evasion.

Misreading an exemption notification did not justify a penalty equal to the duty where exports to Nepal had to be included in the aggregate clearances for the exemption limit. The duty demand was therefore sustained because the exemption threshold was incorrectly applied. As the omission was treated as a bona fide interpretative error rather than deliberate evasion, the equal penalty was found excessive and was reduced to a nominal amount, with penalty still maintained.

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Issues: Whether penalty equal to the duty demand was justified for non-inclusion of the value of clearances to Nepal while availing exemption under Notification No. 8/2002 dated 01.03.2002.

Analysis: The value of exports to Nepal was required to be included in the aggregate value of clearances for the purpose of the exemption limit under the notification, and duty was therefore correctly demanded. However, the appellants had paid the duty and the omission was treated as a misreading of the notification rather than a deliberate attempt to evade duty. In those circumstances, imposition of a penalty equal to the duty was considered excessive.

Conclusion: Penalty was held to be leviable, but not at the equal amount originally imposed, and it was reduced to Rs. 10,000.

Final Conclusion: The demand of duty was sustained, while the penalty was substantially reduced on the ground that the default did not justify equal penalty.

Ratio Decidendi: Where a statutory exemption notification is misread without evidence of deliberate evasion, penalty may be sustained but reduced to a nominal amount in the interests of justice.

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