Rule 25 penalty sustained for duty-paid clearances after default was pointed out; later payment did not cure the breach.

Penalty under Rule 25 of the Central Excise Rules, 2002 was attracted where goods were cleared without payment of duty despite knowledge of liability, and the monthly return disclosed only clearances without duty particulars. Subsequent payment of duty after the default was pointed out, but before issuance of show cause notice, did not by itself extinguish the breach. The omission to specify the sub-rule in the penalty order was treated as a technical lapse and not fatal to the levy. The challenge to penalty failed on merits, though the quantum of penalty was reduced.

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Issues: Whether penalty under Rule 25 of the Central Excise Rules, 2002 was sustainable where duty was paid after being pointed out but before issuance of show cause notice, and whether omission to specify the sub-rule in the penalty order vitiated the levy.

Analysis: The goods had been cleared without payment of duty despite knowledge of liability, and the monthly return disclosed only the clearances without duty particulars. The fact that the duty was subsequently paid before the show cause notice did not, by itself, negate the breach. The omission to mention the sub-rule while imposing penalty was treated as a mere technical lapse. The Tribunal also noted that there was delay in discharging the duty even after the default was pointed out.

Conclusion: Penalty was held to be leviable, and the assessee's challenge to penalty failed on merits, though the quantum of penalty was reduced.

Final Conclusion: The appeal succeeded only to the limited extent of reduction of penalty, while the finding that penalty was attracted was maintained.

Ratio Decidendi: Where duty-paid clearances are made despite knowledge of liability, subsequent payment before notice does not automatically wipe out penalty under Rule 25, and a mere omission in mentioning the sub-rule is not fatal if the substantive breach is established.

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