Pre-notice payment of short-paid duty bars excise penalty absent wilful suppression, leaving no basis for Section 11AC action.

Penalty under the Central Excise regime does not survive where short-paid duty is deposited before the show cause notice and there is no finding of wilful suppression or mens rea. Section 11A(2B) is treated as barring notice once the duty has been paid before notice, and without a valid notice the foundation for penalty under Rule 25 read with Section 11AC falls away. The same principle was applied to both appeals, with the penalty deletion sustained and the revenue's challenge rejected.

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Issues: Whether penalty under Rule 25 of the Central Excise Rules, 2004 read with Section 11AC of the Central Excise Act, 1944 could be imposed where the assessee had paid the short-paid duty before issuance of the show cause notice and there was no finding of wilful evasion.

Analysis: The duty had been paid before the show cause notice was issued and there was no finding of mens rea or wilful suppression. Section 11A(2B) of the Central Excise Act, 1944 was treated as barring issuance of notice once the duty stood paid before notice, and in the absence of a valid notice the foundation for penalty did not survive. The two appeals involved the same legal question and were therefore governed by the same conclusion.

Conclusion: Penalty was not leviable and the setting aside of penalty by the Tribunal was upheld.

Final Conclusion: The revenue's appeals failed, and the orders deleting penalty were sustained.

Ratio Decidendi: Where duty short-paid under the Central Excise Act, 1944 is deposited before issuance of the show cause notice and no wilful evasion is found, penalty under Section 11AC cannot be imposed.

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