Consequential excise penalties cannot survive once the underlying demand is set aside and the appellate result is final.

Personal penalties imposed on company officers under the Central Excise Rules cannot stand where they are wholly derivative of the underlying excise demand and that demand has already been set aside in the company's appeal, with the appellate view affirmed by the Supreme Court. Once the substantive liability forming the foundation of the connected penalty loses legal existence and no contrary material is shown by the Revenue, the consequential penalties also fail. The penalties on the petitioner-officers were therefore held unsustainable and set aside.

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Issues: Whether the penalties imposed on the Managing Director and General Manager under the Central Excise Rules could survive after the company's appeal against the underlying excise demand had already been allowed and that view had been upheld by the Supreme Court.

Analysis: The penalty challenged in the petition was directly linked to the order confirming the excise liability against the company. Once that order had been set aside in the company's appeal and the appellate decision had attained finality, the foundation for imposing and sustaining the personal penalties also disappeared. In the absence of any contrary material from the Revenue, the penalties could not be maintained.

Conclusion: The penalties on the petitioner-officers were held unsustainable and were set aside, in favour of the petitioners.

Ratio Decidendi: Where the substantive excise order forming the basis of a connected penalty has already been set aside and the appellate result has attained finality, the consequential penalty cannot survive.

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