Exemption misdeclaration can justify assessee penalty, but personal penalty needs conscious involvement and proof of culpability.

Wrongly availing an exemption after filing a declaration can sustain penalty on the assessee where contravention is admitted and duty is not voluntarily paid, and the penalty is not excessive on the facts. Personal penalty on a managing director requires proof of conscious involvement or specific culpability; routine handling of company affairs is insufficient, so the penalty was set aside. A Revenue challenge to denial of exemption based on brand-name restrictions also failed where the goods satisfied the exemption conditions and the appeal was directed against the wrong respondent.

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Issues: (i) Whether penalty on the assessee was sustainable for clearing goods outside the scope of the exemption notification; (ii) Whether penalty on the Managing Director under Rule 209A was justified; (iii) Whether the Revenue was entitled to challenge the finding that the goods manufactured by the supplier did not bear the brand name of another person so as to deny exemption.

Issue (i): Whether penalty on the assessee was sustainable for clearing goods outside the scope of the exemption notification?

Analysis: The assessee had filed a declaration claiming the exemption and was therefore presumed to know the limits of the notification. The plea of inadvertence did not succeed. In the absence of voluntary deposit of duty despite admission of contravention, and having regard to the amount of duty evaded, the penalty was not regarded as excessive.

Conclusion: The penalty on the assessee was upheld and the appeal was dismissed.

Issue (ii): Whether penalty on the Managing Director under Rule 209A was justified?

Analysis: The record did not show any conscious act or specific culpability on the part of the Managing Director. He was only handling the routine affairs of the company, and neither the notice nor the findings established the necessary basis for personal penalty.

Conclusion: The penalty on the Managing Director was set aside and his appeal was allowed.

Issue (iii): Whether the Revenue was entitled to challenge the finding that the goods manufactured by the supplier did not bear the brand name of another person so as to deny exemption?

Analysis: The goods supplied by the manufacturer were found to fall within the exemption conditions, as the brand-name restriction in the notification did not operate against a unit similarly eligible to the benefit. The appeal also suffered from a threshold defect because the demand in the notice was raised against one party while the Revenue appeal was filed against another.

Conclusion: The Revenue appeal was dismissed.

Final Conclusion: The order sustained the duty-related and company penalty findings, but granted relief to the Managing Director and rejected the Revenue challenge.

Ratio Decidendi: A penalty may be sustained where exemption is wrongly claimed after declaration, but personal penalty requires proof of conscious involvement; a Revenue challenge may also fail where the statutory brand-name restriction is inapplicable on the facts and the appeal is misdirected against the wrong respondent.

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