Interest on detected shortages, reduced penalty option, and partner penalty under Rule 26 were addressed in partial relief.

Where shortages were detected and the attributable duty was paid on the same day, and no prior clearance of goods was established, interest was held not exigible and the interest demand was set aside. The statutory option to discharge penalty at 25% of duty under Section 11AC was restored because the adjudication order had omitted that benefit; the appellants were directed to exercise the option within 30 days, failing which the penalty would stand at 100% of duty. Separate penalty on the co-appellant under Rule 26 was deleted because the main firm had already been penalized on the same facts.

---

---

Issues: (i) Whether interest was payable when duty on the shortages was paid on the same day the shortages were detected; (ii) Whether the appellants were entitled to the option of reduced penalty under Section 11AC; (iii) Whether penalty on the co-appellant under Rule 26 was sustainable.

Issue (i): Whether interest was payable when duty on the shortages was paid on the same day the shortages were detected.

Analysis: The shortages were detected on 23.12.2011 and the duty attributable to those shortages was paid on the same date. The record did not establish that the goods had been cleared earlier. On that basis, the date of detection was treated as the date of clearance, and interest was held to be not sustainable in the facts of the case.

Conclusion: Interest was not payable and the demand of interest was set aside.

Issue (ii): Whether the appellants were entitled to the option of reduced penalty under Section 11AC.

Analysis: The adjudication order had not granted the statutory option to pay 25% of the duty amount as penalty. The omission was corrected by directing that the appellants would be entitled to pay 25% of the duty as penalty within 30 days of communication of the order, failing which the penalty would stand at 100% of the duty.

Conclusion: The appellants were given the option to pay 25% duty as penalty in accordance with Section 11AC.

Issue (iii): Whether penalty on the co-appellant under Rule 26 was sustainable.

Analysis: The main firm had already been penalized. In those circumstances, separate penalty on the partner under Rule 26 was not considered sustainable.

Conclusion: The penalty imposed on the co-appellant was set aside.

Final Conclusion: The demand of interest was annulled, the statutory option for reduced penalty was restored, and the penalty on the partner was deleted, resulting in partial relief to the appellants.

Ratio Decidendi: Where duty on detected shortages is paid on the same day and no prior clearance is established, interest is not exigible; and where the principal offender is penalized, a separate penalty on the partner under Rule 26 may not be sustained on the same facts.

---