Full Judgment
2. In the order impugned in the appeal, the Commissioner (Appeals) has confirmed the finding of the Assistant Commissioner that the appellant did not pay the duty leviable on the towels that it manufactured, confirming the duty short paid and imposing penalty on it.
3. The counsel for the appellant concedes that there has been short payment of duty on the towels, as duty is payable at the rate applicable of heading 6807.00 of the tariff post payable. He contends that the appellant had acted bona fide. It had paid the duty applicable to cotton fabrics, and was under the impression that no further duty was payable. It gathered this impression because, earlier, notification 65/87 provided that no duty is to be paid on towels as made up articles, if duty had been paid on the towels and fabrics. He further contends that the appellant was a Central Government Undertaking.
4. We do not accept this argument. The notification in question was not in force when the goods in question was removed. The decision of the Tribunal in Divya Enterprises Ltd. Vs. CCE 200 (115) 66 deals with a situation in which a notification provides exemption to towels if the duty had been paid on the fabrics. It is therefore distinguishable fact. We do not see how the fact that the appellant was a Central Government Undertaking has any bearing on the legal requirement to pay duty. However, taking into account the duty involved of Rs. 7.59 lakhs, we reduce the penalty imposed on the appellants from Rs. 4.5 lakhs to Rs. 3 lakhs.