Mandatory procedure for excise abatement upheld, while penalties were waived on bona fide belief grounds.

Under the production-capacity based excise scheme, abatement from duty could not be claimed without compliance with the mandatory procedural requirements, including timely intimation and filing the prescribed declaration. As no declaration for abatement was filed and the production capacity determination was not challenged, the belated claim based on alleged power failure failed, and the duty demand with interest was sustained. The penal consequences, however, were found unwarranted because the assessee could have held a bona fide belief that abatement might be claimed later, so the penalties were set aside.

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Issues: (i) whether abatement from duty under Rule 96ZO(2) could be claimed without following the prescribed procedure and without filing the required declaration; and (ii) whether the penalties imposed were sustainable.

Issue (i): whether abatement from duty under Rule 96ZO(2) could be claimed without following the prescribed procedure and without filing the required declaration.

Analysis: Rule 96ZO of the Central Excise Rules, 1944 required the assessee to discharge duty on the basis of the production capacity determined under the scheme. The claim for abatement was dependent upon compliance with the prescribed procedure, including timely intimation to the authorities. Since the production capacity determination was not challenged and no declaration for abatement had been filed, the benefit could not be claimed belatedly merely on the basis of alleged non-availability of power.

Conclusion: The demand of duty with interest was upheld and the assessee's claim to abatement failed.

Issue (ii): whether the penalties imposed were sustainable.

Analysis: The circumstances showed that the assessee could have entertained a bona fide belief that abatement could be claimed later. In that view, the penal consequence was considered unwarranted.

Conclusion: The penalties were set aside.

Final Conclusion: The duty demand and interest were sustained, but the penalties were annulled, resulting in only partial relief to the assessee.

Ratio Decidendi: Under a production capacity based duty scheme, abatement cannot be claimed without adherence to the mandatory procedural requirements, though penalties may be waived where a bona fide belief is shown.

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