Bona fide valuation omission and voluntary duty payment defeated excise interest and penalty claims.

Differential excise duty paid suo motu before the show cause notice, after discovery of a bona fide omission in valuation, did not justify interest or penalties. The omission to include amortised mould cost in assessable value was corrected by the assessee on its own, with duty computed and paid without any departmental objection or enquiry. On those facts, wilful intent to evade duty was not established, so the conditions for penalty under Section 11AC and interest under the earlier Section 11AB were not met. Penalty under Rule 209A on the partner and buyer was also unsustainable.

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Issues: Whether interest under Section 11AB of the Central Excise Act, 1944, penalty under Section 11AC of the Central Excise Act, 1944, and penalty under Rule 209A of the Central Excise Rules, 1944 were sustainable when the differential duty was paid suo motu before issuance of the show cause notice on account of a bona fide omission in valuation.

Analysis: The dispute related only to interest and penalties, the duty liability itself not being contested. The omission to include the amortised cost of moulds in the assessable value was found to have occurred during the relevant period before the amended valuation regime, and the respondent thereafter realised the mistake, obtained supporting details, computed the differential duty and paid it on its own without any departmental enquiry or objection. On these facts, the conduct did not disclose wilful intention to evade duty. Since the ingredients required for penalty under Section 11AC and for interest under the old Section 11AB were not established, no penalty could also be sustained against the individual partner or the buyer under Rule 209A.

Conclusion: The interest and penalties were not leviable and the Revenue's appeals failed.

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