Bona fide mistaken exemption claim led to nominal penalty, while interest failed absent suppression or misdeclaration.

Duty liability was accepted, but exemption had been availed after the goods were removed from the exemption list under a claimed bona fide mistake. As the clearances were reflected in statutory records and there was a breach of Central Excise law without circumstances justifying a punitive response, the penalty was reduced from the higher amount to a nominal sum of Rs. 5,000. On interest, the absence of suppression, misdeclaration, or similar incriminating conduct meant that interest under Section 11AB of the Central Excise Act, 1944 was not sustainable on the facts found, and the interest demand was set aside.

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Issues: (i) Whether the penalty imposed for availing exemption after the goods were removed from the exemption list should be sustained in full or reduced; (ii) Whether interest under Section 11AB of the Central Excise Act, 1944 was leviable in the absence of suppression or misdeclaration.

Issue (i): Whether the penalty imposed for availing exemption after the goods were removed from the exemption list should be sustained in full or reduced.

Analysis: The liability to duty was not disputed, but the appellant had cleared the goods under the exemption notification under a claimed bona fide mistake after the exemption was withdrawn. The goods and clearances were reflected in statutory records, and the circumstances did not justify a penalty equal to the duty confirmed. At the same time, there had been a breach of the Central Excise law while clearing the goods under the exemption.

Conclusion: The penalty was reduced to a nominal amount of Rs. 5,000 and not sustained at the higher amount.

Issue (ii): Whether interest under Section 11AB of the Central Excise Act, 1944 was leviable in the absence of suppression or misdeclaration.

Analysis: The levy of interest was examined in the light of the applicable pre-amendment position under Section 11AB and the Tribunal's earlier view relied upon by the appellant. In the absence of suppression, misdeclaration, or similar incriminating conduct, the interest demand was not justified on the facts found.

Conclusion: The interest confirmed under Section 11AB was set aside.

Final Conclusion: The duty demand was left intact, but the penalty was substantially reduced and the interest demand was annulled, resulting in only partial relief to the appellant.

Ratio Decidendi: Where duty liability is accepted but the breach occurs under a bona fide mistaken availment of exemption without suppression or misdeclaration, a nominal penalty may replace a punitive one, and interest cannot be sustained unless the statutory preconditions are met.

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