Preemptive Duty Payment Prevents Imposition of Penalty & Interest under Sections 11AC and 11AB

The penalty and interest under sections 11AC and 11AB were found not imposable when duty was paid before the show cause notice, as per the Tribunal's decision in Rashtriya Ispat Nigam, upheld by the Supreme Court. The Commissioner (Appeals) set aside the penalty and interest based on this precedent, noting the duty payment was prompt and not indicative of clandestine removal. The appellant's argument that the duty payment was minimal and preemptive to avoid disputes was accepted, leading to the rejection of the Revenue's appeal.

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Issues involved: Whether penalty is imposable and interest is recoverable u/s 11AC and 11AB when duty is paid before issuance of show cause notice.

The issue in the present appeal is whether penalty and interest are imposable u/s 11AC and 11AB when duty is paid before the show cause notice. The Commissioner (Appeals) set aside the penalty and interest based on a Larger Bench decision in the case of Machino Montell. The appellant argued that the duty amount was minimal and was debited to avoid litigation due to a shortage of inputs, not clandestine removal. The Tribunal's decision in Rashtriya Ispat Nigam, upheld by the Supreme Court, states that payment before the show cause notice does not attract penal action. Therefore, the penalty was rightly set aside as the duty was promptly debited to avoid disputes, leading to the rejection of the Revenue's appeal.

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