Exemption declaration and marginal limit breach did not justify penalty absent wilful suppression or deliberate misstatement.

Penalty was not sustainable where an assessee filed a declaration under an exemption notification, exceeded the clearance limit only marginally, and disclosed the correct clearances in monthly returns. The factory was newly established, prior-year clearances were minimal, and the assessee informed the department when the higher level was reached. On those facts, the initial declaration could not be treated as a knowingly false statement, and the later payment of duty did not by itself establish wilful suppression or deliberate mis-declaration. The penalty was therefore set aside.

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Issues: Whether penalty was sustainable where the assessee had filed a declaration under the exemption notification, crossed the clearance limit only marginally, disclosed the correct clearances in monthly returns, and the department alleged suppression and deliberate mis-statement.

Analysis: The exemption notification turned on the assessee's declaration as to the likelihood of clearances not exceeding the prescribed limit. The factory was newly established, the prior year's clearances were minimal, and the clearances during the year exceeded the limit only marginally. The assessee had filed monthly returns showing the correct value of clearances and had informed the department when the higher level was reached. On these facts, the declaration at the start of the year could not be treated as a knowingly false statement, nor could the later collection of duty by itself establish wilful suppression or deliberate mis-declaration.

Conclusion: Penalty was not justified and was set aside in favour of the assessee.

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