Penalty for delayed excise duty payment is not automatic where duty and interest are paid and no intent to evade is shown.

Delayed payment of central excise duty, followed by payment of the duty and interest before the show-cause notice, did not by itself require penalty under Section 11AC of the Central Excise Act and Rule 25 of the Central Excise Rules, 2002. In the absence of any material showing an intention to evade duty, the penalty provisions were treated as discretionary rather than automatic. The Commissioner (Appeals)'s view declining penalty was found neither irrational nor arbitrary, and the Revenue's appeal failed.

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Issues: Whether penalty was imposable for delayed payment of central excise duty where the duty was paid before issuance of the show-cause notice.

Analysis: Liability to penalty under Section 11AC of the Central Excise Act and Rule 25 of the Central Excise Rules, 2002 was examined in the setting of Rule 8(3) of the Central Excise Rules, 2002. The delay in payment was established, and interest had been paid. However, the record did not show any intention to evade duty. In such circumstances, although the rules create liability to penalty, imposition is not automatic in every case. The discretionary view taken by the Commissioner (Appeals) was found neither irrational nor arbitrary.

Conclusion: Penalty was not imposed, and the appeal of the Revenue failed.

Ratio Decidendi: Where delayed payment of duty is accompanied by payment of duty and interest and there is no material indicating an intention to evade, penalty under the excise law is not mandatory and may be declined in the exercise of discretion.

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