Voluntary payment before adjudication can defeat penalty under Section 11AC where duty and interest are not disputed on appeal.

Penalty under Section 11AC of the Central Excise Act, 1944 was not warranted where duty and interest had been paid by the assessee during investigation before adjudication, and that payment was not disputed in the appeal. The discussion arose from CENVAT credit on input services used for both dutiable and exempted goods under Rule 6(2) of the CENVAT Credit Rules, 2004. Applying the principle underlying Section 11A(2B), the Tribunal treated the payment as voluntary and left the duty demand undisturbed while setting aside the penalty.

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Issues: Whether penalty under Section 11AC of the Central Excise Act, 1944 was leviable when the duty and interest had been paid by the assessee on being pointed out during investigation and the assessee had challenged only the penalty.

Analysis: The dispute concerned availment of CENVAT credit on input services used for both dutiable and exempted goods, in the setting of Rule 6(2) of the CENVAT Credit Rules, 2004. The assessee had paid the duty and interest during investigation and had not contested that payment before the lower appellate authority. On that basis, the demand itself was treated as not open to challenge in this appeal. The Tribunal accepted the assessee's plea that, in the facts of the case, the matter fell within the principle underlying Section 11A(2B) of the Central Excise Act, 1944, namely voluntary payment before formal adjudication.

Conclusion: Penalty was waived and no penalty under Section 11AC of the Central Excise Act, 1944 was sustained against the assessee.

Final Conclusion: The appeal succeeded to the limited extent of penalty, while the duty payment remained undisturbed.

Ratio Decidendi: Where duty and interest are paid voluntarily before adjudication and the assessee does not dispute that payment, penalty under Section 11AC is not warranted on the same facts.

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