Voluntary pre-notice payment of excise duty and interest can bar penalty absent intent to evade duty.

Voluntary payment of central excise duty and interest before issuance of the show-cause notice, with the payments disclosed in returns, attracts the protection of Section 11A(2B) of the Central Excise Act, 1944. Where there is no finding of intent to evade duty, penalty under Rule 25 and Section 11AC cannot be sustained. The pre-notice discharge of liability therefore defeats penal consequences on these facts, and no penalty is payable against the assessee.

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Issues: Whether penalty was sustainable when the assessee had paid the duty and interest before issuance of the show-cause notice and the case fell within the scope of Section 11A(2B) of the Central Excise Act, 1944.

Analysis: The duty liability and interest had been discharged by the assessee on its own before the show-cause notice was issued, and the returns filed by it disclosed the payments. In the absence of a finding of intention to evade duty, the pre-notice voluntary payment attracted the statutory protection under Section 11A(2B). On these facts, the penalty provisions invoked under Rule 25 and Section 11AC could not be sustained.

Conclusion: The penalty was rightly set aside and no penalty was payable against the assessee.

Ratio Decidendi: Where duty and interest are paid voluntarily before issuance of the show-cause notice and there is no finding of intent to evade duty, penalty is not leviable.

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