Pre-notice duty payment and no proof of clandestine removal bar central excise penalty and raise no substantial question of law.

Where excise duty was paid before issuance of the show cause notice and no corroborative evidence proved clandestine removal, penalty under the Central Excise penalty provisions was not sustainable. The High Court noted that the appellate authority had rightly retained the duty already deposited while deleting penalty and interest, and that the Revenue had not shown any substantial question of law arising from the invocation of Section 11A(2B). The settled position applied was that pre-notice payment of duty, without proof of suppression or clandestine clearance, defeats penalty under Section 11AC and Rule 173Q.

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Issues: Whether the Revenue's appeals under Section 35G of the Central Excise Act, 1944 raised any substantial question of law on the imposition of penalty and issuance of show cause notice after duty had been paid before notice, and whether penalty could be sustained in the absence of proof of clandestine removal.

Analysis: The order under challenge recorded that the assessee had paid the duty before issuance of the show cause notice and that no corroborative evidence established clandestine removal. On that basis, the appellate authority set aside the penalty and interest, while confirming the duty already deposited. The court also relied on the settled position that, where duty is deposited before notice, penalty under Section 11AC of the Central Excise Act, 1944 and under Rule 173Q of the Central Excise Rules, 1944 is not attracted, and that the invocation of Section 11A(2B) of the Central Excise Act, 1944 was not shown to give rise to any substantial question of law.

Conclusion: The appeals did not disclose any substantial question of law and the Revenue's challenge to the deletion of penalty failed.

Final Conclusion: The judgment affirms the setting aside of penalty and interest while leaving the duty liability undisturbed, resulting in dismissal of the Revenue's appeals.

Ratio Decidendi: Where excise duty is paid before issuance of the show cause notice and clandestine removal is not proved by corroborative evidence, penalty under the penal provisions of the Central Excise law is not sustainable and no substantial question of law arises.

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