1. After hearing learned counsel for the parties for some time we are of the opinion that the Tribunal has rightly come to the conclusion that the appellant herein did not satisfy the conditions mentioned in the Notification dated 23.7.1996 which grants exemption from payment of excise duty, inter alia, in respect of footwear and hawai chappal if the retail sale price does not exceed Rs.75/-. No doubt, goods in question sold by the appellant on retail price, namely, the foot wear, was at less than Rs. 75/-per pair. However, we find that the said Notification also imposed a specific condition to the effect that the goods are to be consumed within the factory for their production. In the instant case the goods were sent to the other factories for production. Therefore that condition is clearly not satisfied.

2. However, insofar as penalty imposed upon the appellant is concerned, we are inclined to set aside the same simply on the ground that the appellant has its own factory where the goods in question viz. the inputs are used for manufacture of footwear. However, for a brief period during which there was some labour problems in the appellants own factory, the production was outsourced and exemption claimed for that period under bona fide belief.

3. The appeal therefore is allowed to the limited extent by setting aside the penalty while maintaining the demand.