Strict compliance for reduced excise penalty fails when duty, interest, and 25% penalty are not paid within the statutory period.

Penalty under Rule 26 of the Central Excise Rules, 1944 was held applicable where recorded statements showed that the Director was actively concerned with clandestine removal and disposal of excisable goods. The first proviso to Section 11A(2) of the Central Excise Act, 1944 was available only on strict compliance with payment of duty, interest, and 25% penalty within 30 days of receipt of notice. Because interest and the reduced penalty were paid after the prescribed period, the concessional finality under that proviso was unavailable, and the earlier deletion of penalty was set aside. The penalty was restored, subject to reduction to Rs. 25,000.

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Issues: Whether the Director of the assessee-company was liable to penalty for clandestine removal of excisable goods and whether the benefit of the first proviso to Section 11A(2) of the Central Excise Act, 1944 was available when duty had been paid before notice but interest and 25% penalty were paid after the stipulated period.

Analysis: The evidence, including the recorded statements, showed that the clandestine removals were admitted by both the General Manager and the Director, establishing the Director's active concern with the sale and disposal of the goods. On that basis, penalty under Rule 26 of the Central Excise Rules, 1944 was attracted. The concessional closure under the first proviso to Section 11A(2) applies only when duty, interest, and 25% penalty are paid within 30 days of receipt of notice. As the interest and reduced penalty were paid after expiry of that period, the statutory condition was not satisfied and the Commissioner (Appeals) erred in deleting the penalty.

Conclusion: The Director was liable to penalty under Rule 26, and the benefit of the first proviso to Section 11A(2) was not available. The penalty was therefore restored, though reduced to Rs. 25,000.

Ratio Decidendi: The concessional finality under Section 11A(2) is available only on strict compliance with the requirement of payment of duty, interest, and 25% penalty within the prescribed 30 days; failure to satisfy that condition preserves liability to penalty, including under Rule 26 where the person is concerned with clandestine removal.

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