Bona fide belief and pre-show-cause duty payment justify of equal penalty and interest under central excise law

Bona fide belief that the goods were exempt justified refusal of equal penalty and interest on the duty already paid before issue of the show-cause notice, while only the balance duty demand was confirmed. The Tribunal noted that the lower authorities relied on a Larger Bench ruling and that no material was produced to dislodge that view. It was also relevant that the assessee had paid more duty than was actually due because relief under Section 4(4)(d)(ii) of the Central Excise Act, 1944 had not been granted, and no appeal was filed by the assessee on that aspect. The Revenue's appeal was dismissed.

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Issues: Whether the Revenue could succeed in seeking interference with the order declining equal penalty and interest on duty paid before issue of the show-cause notice, while confirming only the balance duty demand.

Analysis: The lower authorities had accepted that the assessee acted under a bona fide belief that the goods were exempt and had relied on the Tribunal's Larger Bench decision for not imposing equal penalty and not demanding interest on the duty already paid before issuance of the show-cause notice. No authority was shown to dislodge that view. It was also noticed that the assessee had, in any event, paid more duty than was actually due because relief under Section 4(4)(d)(ii) of the Central Excise Act, 1944 had not been granted, and no appeal had been filed by the assessee against that aspect.

Conclusion: The impugned order did not warrant interference and the Revenue's appeal was dismissed.

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