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Prosecution under Rule9(1)? If penalty deleted by Hon'SC

This query is : Resolved 
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(Querist)
25 July 2009 Case started in mid 1980's (show cause)

Duty and penalty levied on the party 'X'

tribunal altered the duty calculation and penalty. Minimum deposit and bank gaurantee given against the amount.

Meanwhile prosecution case started after 8-9 months of show cause.

Thereafter, Hon' SC deleted the penalty completly on the ground that when tribunal has altered the excise duty amount so penalty should not be imposed.

Our query is... Can the prosecution case stand when the penalty has been rejected?
Cancellation of penalty shows that there was no intention of duty invasion and so the Rule 9(1) should not be applicable.
Does anyone know any example case wherein such judgements have passed.
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Bhaskaran Chackrapani Warrier

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Bhaskaran Chackrapani Warrier (Expert)
25 July 2009 Once penalty is deleted on the ground that there is no concealment, the quashing of prosecution is automatic.

Citation:-1) K.C. Builders Vs. ACIT (2004) 135 Taxman 461 (SC).

2) Sudarshan Jain Vs. ACIT (2004) 270 ITR 312 (Punj & Har).
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