Clandestine removal attracts Section 11AC penalty even if duty is paid before notice, where evasion is admitted.

Admitted clandestine removal of excisable goods without proper invoices and without payment of duty attracted penalty under Section 11AC of the Central Excise Act, 1944. Pre-notice payment of duty did not, by itself, wipe out penal liability where the statutory conditions for deterrent action were otherwise satisfied. The Tribunal rejected the view that duty payment after detection could neutralise consequences of deliberate evasion, since that would undermine the object of the penalty provision. The order deleting penalty was set aside and the penalty was restored.

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Issues: Whether penalty under Section 11AC of the Central Excise Act, 1944 was liable to be set aside merely because duty had been paid before issuance of the show cause notice despite admitted clandestine removal.

Analysis: The removal of goods without proper excise invoices and without payment of duty was admitted. The earlier view that pre-notice payment of duty by itself justified deletion of penalty was not accepted. The Tribunal held that a person who indulges in outright clandestine removal cannot avoid penal consequences merely by paying duty after being caught, as such a result would defeat the object of deterrent penalty and encourage risk-free evasion.

Conclusion: Penalty under Section 11AC was held payable and the order deleting the penalty was set aside.

Final Conclusion: The penalty order was restored and the assessee's challenge to the imposition of penalty failed.

Ratio Decidendi: In cases of admitted clandestine removal, payment of duty before or after notice does not by itself neutralize liability to penalty under Section 11AC where the statutory conditions for penal action are otherwise attracted.

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