Pre-notice duty payment bars central excise penalty and interest under Section 11A(2B) where statutory conditions are not met

Where duty is discharged before issuance of the show cause notice, Section 11A(2B) of the Central Excise Act, 1944, as amended and read with the Larger Bench view relied on, was treated as removing the statutory basis for interest and penalty. On that footing, penalty under Rule 25 of the Central Excise Rules, 2002 and Section 11AC of the Central Excise Act, 1944 was held not sustainable, and interest under Section 11AB was also treated as not leviable.

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Issues: Whether penalty under Rule 25 of the Central Excise Rules, 2002 and Section 11AC of the Central Excise Act, 1944, together with interest under Section 11AB of the Central Excise Act, 1944, were sustainable when the duty had been discharged before issuance of the show cause notice in the light of Section 11A(2B) of the Central Excise Act, 1944.

Analysis: The duty demand had already been paid before the show cause notice was issued. In view of the amendment to Section 11A(2B) of the Central Excise Act, 1944, and the Larger Bench decision relied upon, where duty is paid before issuance of notice, the statutory basis for invoking penalty and interest does not survive. On that footing, the penalty under Rule 25 and Section 11AC could not be sustained.

Conclusion: Penalty and interest were not leviable, and the appeal succeeded.

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