Branded goods cleared in breach of small scale exemption conditions attract penalty, though quantum may be reduced in suitable cases.

Clearing branded goods in breach of small scale exemption conditions attracted penalty because the assessee could not claim exemption for cough drops sold under another's brand name. Knowledge of the notification conditions was presumed, and the plea under Section 11B(2) of the Central Excise Act did not assist the assessee; the conduct was treated as wilful suppression. Penalty under Section 11AC was therefore sustainable, although the adjudicating authority could reduce the quantum where leniency was justified on the facts. The penalty was reduced to Rs. 15,000.

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Issues: Whether the penalty imposed on the assessee for clearing branded goods in violation of the small scale exemption notification was justified, and whether the penalty warranted reduction.

Analysis: The assessee was availing the small scale exemption but was found clearing cough drops under another's brand name, for which the exemption was not available. In such circumstances, knowledge of the notification conditions could be presumed and the plea based on Section 11B(2) of the Central Excise Act did not avail the assessee. The conduct was treated as involving wilful suppression, making the assessee liable to penalty. At the same time, reliance was placed on the principle that the adjudicating authority could impose a lesser penalty where the facts justified leniency.

Conclusion: The penalty under Section 11AC was sustainable, but it was reduced to Rs. 15,000.

Ratio Decidendi: Where branded goods are cleared in breach of the small scale exemption conditions and the facts indicate wilful suppression, penalty is attracted, though the quantum may be reduced in appropriate cases.

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