Bona fide interpretation of notification defeats central excise penalty where no clandestine removal or mala fide intent is shown.

Penalty under Rule 173Q and Rule 209A was found unsustainable because the dispute arose from a bona fide interpretation of the notification, and no material established clandestine removal or mala fide intention. The record showed that a declaration had been filed and the non-payment of correct duty resulted from a wrong reading of the notifications, not from deliberate evasion. On that factual basis, the Tribunal agreed that the essential foundation for penalty was absent and rejected the Revenue's appeals.

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Issues: Whether penalty under Rule 173Q of the Central Excise Rules, 1944 and Rule 209A of the Central Excise Rules, 1944 was justified when the dispute arose from a bona fide interpretation of the notification and no clandestine removal or mala fide intention was established.

Analysis: The Commissioner (Appeals) found no material showing clandestine removal of goods without payment of duty. The record indicated filing of a declaration and a wrong interpretation of the notifications, which led to non-payment of correct duty. On that basis, the penalty on the appellant and the partner was held to be unsustainable. The Tribunal agreed that the case involved a bona fide interpretation of the notification and that the factual foundation for penalty was absent.

Conclusion: Penalty was not warranted; the Revenue's appeals were rejected.

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