Consequential penalty falls with the main demand, while cum-duty valuation requires fresh re-determination on remand.

Consequential penalty could not be sustained once the principal Modvat credit denial had been set aside, because the penalty had to follow the fate of the main demand. The assessable value also had to be re-examined on the basis of the cum-duty price, as that valuation plea had been raised but not specifically decided and required fresh consideration by the adjudicating authority. The matter was therefore remitted for re-determination of value and reconsideration of the penalty consequence in line with the substantive finding.

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Issues: (i) Whether the penalty could survive after the denial of Modvat credit was set aside; (ii) whether the assessable value required re-determination by taking the cum-duty price into account.

Issue (i): Whether the penalty could survive after the denial of Modvat credit was set aside.

Analysis: The Tribunal had itself held that denial of Modvat credit was not tenable and had set aside that finding. Once the principal demand on that basis did not survive, the consequential penalty could not be sustained merely in part. The penalty had to conform to the fate of the main demand that had been interfered with.

Conclusion: The penalty could not be retained in part and was liable to be set aside.

Issue (ii): Whether the assessable value required re-determination by taking the cum-duty price into account.

Analysis: The contention that the price should be treated as cum-duty price had been raised before the Tribunal, but no finding had been recorded on that issue. The plea was supported by settled legal principles and, in the absence of a specific denial to the factual assertion, the valuation required reconsideration by the adjudicating authority.

Conclusion: The value was required to be re-determined by taking the cum-duty price into account.

Final Conclusion: The writ petition succeeded to the extent of setting aside the penalty and requiring fresh determination of value, and the matter was remanded to the adjudicating authority for that purpose.

Ratio Decidendi: Where the principal demand or adverse finding is set aside, consequential penalty cannot be sustained in a reduced form, and a valuation issue specifically raised but left undecided must be examined afresh by the authority concerned.

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