Penalty for exemption misuse was deleted where duty and interest were paid and penal consequences were unjustified.

Penalty imposed for availing exemption under Notification No. 108/95 was found unsustainable where the goods had been cleared for a project funded by the Japan Bank for International Co-operation and the duty with interest was later paid. On those facts, the penalty confirmed by the lower appellate authority was deleted, and no penal liability survived. The duty and interest liability remained undisturbed, so relief was confined only to removal of the penalty.

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Issues: Whether the penalty imposed on the assessee for availing exemption under Notification No. 108/95 was sustainable.

Analysis: The goods were cleared for a project funded by Japan Bank for International Co-operation, and the duty and interest were subsequently paid. In the circumstances noticed, the penalty confirmed by the lower appellate authority was found to be unjustified.

Conclusion: The penalty was set aside and no penalty survived against the assessee.

Final Conclusion: The appeal succeeded only to the extent of deletion of penalty, while the duty and interest liability remained undisturbed.

Ratio Decidendi: Where the substantive duty and interest are paid and the circumstances do not justify penal consequences, the penalty cannot be sustained.

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