Penalty for clandestine removal and suppression restored where duty payment before notice did not justify deletion

Penalties under Rule 25 read with Section 11AC and Rule 26 were stated to be sustainable where duty was confirmed on clandestine removal and suppression. The text notes that payment of duty before issuance of the show cause notice did not, by itself, justify deletion of penalties when the duty demand had already been upheld. It further records that, because the Revenue had not challenged the quantum of penalty and the appellate interference was unsustainable, the original penalties imposed by the adjudicating authority were restored and upheld.

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Issues: Whether the penalty imposed by the original adjudicating authority under Rule 25 read with Section 11AC and under Rule 26 could be restored after the appellate authority had set aside the penalties on the ground that duty had been paid before issuance of the show cause notice.

Analysis: The duty demand had been confirmed on allegations of clandestine removal and suppression. The original adjudicating authority had imposed penalties, but the Revenue had not challenged the quantum of penalty before the appellate authority. In view of the settled position that penalty is mandatory where duty is confirmed on suppression, the appellate authority was not justified in deleting the penalties while retaining the duty demand. The original penalties, as imposed, were therefore required to be upheld.

Conclusion: The penalties imposed by the original adjudicating authority were restored and upheld.

Final Conclusion: The Revenue succeeded in restoring the penalties originally imposed, and the relief granted by the appellate authority in favour of the assessee was set aside.

Ratio Decidendi: Where duty is confirmed on clandestine removal or suppression, penalty cannot be deleted merely because duty was paid before the show cause notice, and the penalty originally imposed may be restored if the appellate interference is unsustainable.

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