Interpretational error and absence of contumacious conduct justified waiver of penalty for short payment under a notification.

Penalty waiver was justified where the assessee's short payment arose from an interpretational error in implementing Notification No. 15/2002 and there was no evidence of deliberate or contumacious breach. The shortfall continued only briefly after the notification came into force, and the record did not support an inference of intentional short-payment. Once the correct interpretation was understood, the assessee made good the revenue loss. In the early stage of implementation, such interpretational difficulty was a plausible explanation, so no interference with the waiver was called for.

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Issues: Whether penalty could be waived where the assessee's short payment arose from an interpretational error in the implementation of Notification No. 15/2002 dated 1-3-2002 and there was no deliberate or contumacious breach.

Analysis: The breach continued only for a short period after the notification came into force. The record did not show any deliberate intention to cause loss to revenue, and the inference of intentional short-payment was unsupported by any finding of contumacious conduct. Once the correct interpretation was understood, the assessee made good the revenue loss. In the early stage of implementation of the notification, such interpretational difficulty could not be ruled out.

Conclusion: The waiver of penalty was justified and no interference was called for.

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