Penalty refund under Central Excise denied where duty was later refunded through ad hoc exemption and original order remained final.

Penalty imposed under an Order-in-Original was held not refundable merely because the underlying duty demand was later refunded pursuant to an ad hoc Central Excise exemption. The refund of duty flowed from the exemption and did not set aside the original adjudication or undo the finding of liability on which the penalty rested. As no appeal had been filed against the Order-in-Original within time, that order had attained finality, and the exemption did not extinguish the penalty or erase the offence already recorded. The penalty refund claim was therefore rejected.

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Issues: Whether penalty imposed under the Order-in-Original was refundable when the duty demand stood refunded pursuant to an ad hoc exemption under the Central Excise law.

Analysis: The duty refund was granted only because of an ad hoc exemption issued by the Central Government and not because the original adjudication was set aside in appeal. The Order-in-Original, including the penalty component, had attained finality since no appeal was filed against it within time. The exemption removed the duty liability but did not annul the penalty or erase the offence already found.

Conclusion: The penalty refund was not admissible and the appeal failed.

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