Penalty unsustainable for bona fide exemption claim and pre-notice duty payment without suppression or misdeclaration

Penalty was held unsustainable where the assessee had disclosed clearance of prototype vehicles, claimed exemption bona fide, and paid the duty and interest before the show-cause notice. The record showed no mala fide intent, suppression of facts, or misdeclaration, and the dispute was confined to differential duty already discharged. On those facts, the basis for penalty was not made out, and the order setting aside penalty was upheld.

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Issues: Whether penalty was sustainable when the assessee had informed the department of clearance of prototype vehicles, claimed exemption bona fide, and paid the duty and interest before issuance of the show-cause notice.

Analysis: The assessee had disclosed the clearances from the beginning and had sought the benefit of the exemption notification. After the department declined the exemption, duty was paid before the show-cause notice, and the record did not disclose any mala fide intention, suppression of facts, or misdeclaration. In these circumstances, the case was confined to differential duty, already discharged, and the basis for imposing penalty was not made out.

Conclusion: Penalty was not leviable and the order setting aside the penalty was upheld.

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