Penalty for pre-notice duty payment was set aside despite duty regularisation being upheld.

Duty paid before issuance of the show cause notice was treated as regularised, and the lapse of credit under the amended Rule 57H did not disturb that confirmation. Penalty was held unsustainable because the decisive fact was that the duty amount had been discharged within a few weeks of utilisation of credit and before the notice stage, so no continuing non-payment survived when proceedings were initiated. The duty regularisation aspect was sustained, but the penal portion was deleted, giving partial relief.

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Issues: Whether penalty was sustainable when the duty amount was paid before issuance of the show cause notice.

Analysis: The credit standing to the appellant's account had lapsed by virtue of the amendment introducing paragraph 7A in Rule 57H. The payment made towards duty was confirmed and regularised. On the question of penalty, the decisive factor was that the duty amount had been paid within a few weeks of utilisation of credit and before the show cause notice was issued. In such circumstances, penalty was held to be attracted only where the non-payment survived till the notice stage, which was not the position here.

Conclusion: Penalty was not leviable and was set aside.

Final Conclusion: The order was sustained on the duty regularisation aspect, but the penal portion was deleted, resulting in partial relief to the appellant.

Ratio Decidendi: Where duty is discharged before issuance of the show cause notice, penalty is not warranted despite the underlying duty demand being otherwise sustainable.

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