Exemption-threshold computation includes compounded levy clearances, while purchaser penalty needs proof of conscious participation in evasion

Clearances covered by a compounded levy scheme may be counted when testing the exemption threshold under Notification No. 8/2003-CE, and duty remains payable where the prescribed limit is crossed and goods are misdescribed or cleared without proper invoices. By contrast, penalty cannot be imposed on a purchaser-dealer unless the record shows conscious involvement in the supplier's misdeclaration or evasion; mere purchase of goods is insufficient. The manufacturer's duty liability was maintained, while the purchaser-dealer's penalty was removed.

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Issues: (i) whether the value of clearances under the compounded levy scheme was liable to be included for determining the exemption threshold under Notification No. 8/2003-CE and whether duty was payable on the clearances of aluminium sheets and allied goods; (ii) whether penalty on the purchaser-dealer for alleged involvement in the supplier's misdeclaration and evasion was justified.

Issue (i): whether the value of clearances under the compounded levy scheme was liable to be included for determining the exemption threshold under Notification No. 8/2003-CE and whether duty was payable on the clearances of aluminium sheets and allied goods.

Analysis: The value of all clearances, including those covered by the special procedure, was held relevant for testing the monetary threshold for exemption. The admitted crossing of the prescribed limit, coupled with the recorded misdescription of aluminium sheets as aluminium circles or aluminium thickness and clearance without proper invoices, supported the finding of liability to duty. The challenge to the duty demand did not dislodge the factual basis accepted by the lower authority.

Conclusion: The duty demand was sustained against the assessee.

Issue (ii): whether penalty on the purchaser-dealer for alleged involvement in the supplier's misdeclaration and evasion was justified.

Analysis: The dealer was only a purchaser of goods and was neither shown to be a manufacturer nor a registered dealer bound to verify central excise compliance in the manner alleged. The record did not establish conscious involvement in the supplier's misdeclaration, and fastening penal liability on an uninvolved purchaser was found unwarranted.

Conclusion: The penalty on the purchaser-dealer was set aside.

Final Conclusion: The duty and other adverse findings against the manufacturer were maintained, but the penalty on the purchaser-dealer was removed, and the revenue appeal did not survive.

Ratio Decidendi: For exemption-threshold computation under the relevant notification, clearances covered by the compounded levy scheme may be included where the facts establish crossing of the limit, but penalty cannot be imposed on a purchaser absent proof of conscious participation in the supplier's evasion.

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