Penalty and interest under Central Excise law were not leviable where duty was paid before notice and extended period was not invoked.

Penalty under Section 11AC of the Central Excise Act, 1944 was not leviable because the duty had been paid before the show cause notice, the demand was confirmed under Section 11A(1), and the extended period was not clearly invoked. Interest under Section 11AB was also not leviable on the facts found, as the duty stood discharged before notice and the appellate order did not proceed on an extended-period basis. The Revenue's challenge therefore failed and the order setting aside penalty and interest liability was sustained.

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Issues: (i) Whether penalty was leviable under Section 11AC of the Central Excise Act, 1944 when the duty had been paid before issuance of the show cause notice and the demand had been confirmed without invoking the proviso to Section 11A of the Central Excise Act, 1944. (ii) Whether interest was leviable under Section 11AB of the Central Excise Act, 1944 in the facts of the case.

Issue (i): Whether penalty was leviable under Section 11AC of the Central Excise Act, 1944 when the duty had been paid before issuance of the show cause notice and the demand had been confirmed without invoking the proviso to Section 11A of the Central Excise Act, 1944.

Analysis: The demand was confirmed under Section 11A(1) of the Central Excise Act, 1944, and the adjudicating authority had not clearly invoked the extended period under the proviso to Section 11A of the Central Excise Act, 1944. The duty liability arose from wrong classification, which was accepted by the respondent, and the duty was paid before issuance of the show cause notice. In these circumstances, the precondition for imposing penalty under Section 11AC was not satisfied.

Conclusion: Penalty under Section 11AC of the Central Excise Act, 1944 was not leviable, in favour of the assessee.

Issue (ii): Whether interest was leviable under Section 11AB of the Central Excise Act, 1944 in the facts of the case.

Analysis: Since the duty had been discharged before the show cause notice and the order sustaining demand proceeded without invoking the extended period, the basis for fastening interest as claimed in the appeal was not made out on the facts found by the appellate authority.

Conclusion: Interest under Section 11AB of the Central Excise Act, 1944 was not leviable, in favour of the assessee.

Final Conclusion: The Revenue's challenge to the appellate order failed, and the order setting aside penalty and interest liability was sustained.

Ratio Decidendi: Penalty under Section 11AC of the Central Excise Act, 1944 cannot be sustained where duty is paid before the show cause notice and the demand is confirmed without invoking the extended period under Section 11A of the Central Excise Act, 1944.

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