Penalty refund denied where ad hoc duty exemption did not disturb the final order-in-original.

Penalty imposed in the order-in-original was not refundable merely because the duty component had been refunded under an ad hoc exemption granted by the Central Government. The exemption affected only the duty portion and did not set aside the original adjudication or disturb the penalty findings. As no appeal had been filed against the order-in-original, it had attained finality on the penalty issue. The refund of penalty was therefore not admissible.

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Issues: Whether penalty levied under the order-in-original was refundable after the duty component had been refunded pursuant to an ad hoc exemption under Section 5A(ii) of the Central Excise Act, 1944.

Analysis: The duty was refunded only because of the ad hoc exemption granted by the Central Government and not because the original adjudication order had been set aside in appeal. The order-in-original had attained finality in respect of the penalty, as no appeal had been filed against it. The exemption order affected only the duty portion and did not obliterate the penalty or the findings underlying it.

Conclusion: The refund of penalty was not admissible.

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