Duty demand upheld on binding precedent, but penalty set aside where the dispute had remained unsettled and facts did not justify punishment.

Duty demand was upheld because the substantive levy was already covered by a prior Supreme Court decision in favour of the Revenue, and the Tribunal's contrary view could not stand on merits. Penalty was nevertheless set aside because the Court considered the peculiar facts and the existence of conflicting judicial opinion before the controversy was settled, making penal consequences unjustified. The appeals were thus allowed in part: the duty component was sustained, but the penalty component was removed.

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Issues: (i) Whether the duty demand on merits was sustainable in the Revenue's favour; (ii) Whether penalty was exigible in the facts of the case.

Issue (i): Whether the duty demand on merits was sustainable in the Revenue's favour.

Analysis: The issue on merits was treated as covered by the prior decision of the Court in favour of the Revenue. On that basis, the Tribunal's decision could not be sustained insofar as the duty liability was concerned.

Conclusion: The duty demand was upheld and the appeals succeeded to that extent, in favour of the Revenue.

Issue (ii): Whether penalty was exigible in the facts of the case.

Analysis: Although duty was upheld, the Court took note of the peculiar facts and the existence of conflict of judicial opinion before the issue was settled. On that reasoning, imposition of penalty was considered unjustified.

Conclusion: Penalty was set aside and was not sustained against the respondents.

Final Conclusion: The appeals were allowed in part: the order sustaining duty was affirmed, while the penalty component was set aside.

Ratio Decidendi: Where the substantive levy is covered by binding precedent, it may be upheld, but penalty may still be declined if the controversy was unsettled and the surrounding facts do not justify penal consequence.

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