Tacit departmental acceptance defeats penalty where classification approval was delayed and no suppression or wilful contravention was shown.

Penalty could not be sustained for clearances made while a classification list remained pending approval, where the assessee had regularly filed classification lists, the goods were cleared on the basis of an earlier approved classification, and the Department was aware of the clearances and assessments. The delay in finalising the later classification lists was attributable to departmental inaction, so the clearances were treated as having received tacit departmental acceptance. In the absence of suppression or wilful contravention, no penalty was leviable and the penalty order was set aside.

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Issues: Whether penalty was leviable for clearance of goods while the classification list remained pending approval.

Analysis: The appellants had been filing classification lists regularly and the goods were cleared on the basis of the classification already approved earlier. The Department was aware of the clearances, RT-12 returns were being received and assessed, and the non-finalisation of the later classification lists was attributable to the departmental authorities. In these circumstances, the clearances made without formal approval of the pending classification list were treated as having received tacit departmental acceptance, and no suppression or deliberate contravention warranting penalty was made out.

Conclusion: Penalty was not leviable.

Final Conclusion: The penalty order was set aside and the appeal succeeded.

Ratio Decidendi: Where the assessee has regularly filed classification lists, the department is aware of the clearances and assessments, and the delay in approval is due to departmental inaction, penalty cannot be sustained absent suppression or wilful contravention.

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