Pre-notice duty payment without intent to evade does not justify central excise penalty under the statutory scheme.

Penalty under the central excise penalty scheme is attracted only where short payment or non-payment is coupled with fraud, collusion, wilful misstatement, suppression of facts, or contravention with intent to evade duty. Where duty is discharged before issuance of the show cause notice and no intentional evasion is found, the note states that penalty under Section 11AC and Rule 25 is not warranted. It also records that absence of a formal authorization for filing the Revenue appeal was treated as a curable defect and not one affecting maintainability, so the objection was rejected.

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Issues: (i) Whether the Revenue's appeal was not maintainable for want of formal authorization under Section 35B(2) of the Central Excise Act, 1944. (ii) Whether penalty was leviable under Section 11AC of the Central Excise Act, 1944 and Rule 25 of the Central Excise Rules, 2002 when the duty had been paid before issuance of the show cause notice.

Issue (i): Whether the Revenue's appeal was not maintainable for want of formal authorization under Section 35B(2) of the Central Excise Act, 1944.

Analysis: The Committee of Commissioners had considered the matter and decided by circulation to file the appeal. The absence of a formal authorization was treated as a curable defect and not one going to the root of maintainability.

Conclusion: The objection to maintainability was rejected and the appeal was held maintainable.

Issue (ii): Whether penalty was leviable under Section 11AC of the Central Excise Act, 1944 and Rule 25 of the Central Excise Rules, 2002 when the duty had been paid before issuance of the show cause notice.

Analysis: Penalty under the statutory scheme requires more than mere short payment or suppression; it must be accompanied by fraud, collusion, wilful misstatement, suppression of facts, or contravention with intent to evade duty. On the facts, there was no finding of intentional evasion, and the duty had already been discharged before the show cause notice. The Tribunal also noted that, applying the cited authority, the penalty would be only 25% of the duty amount, which did not justify interference.

Conclusion: Penalty was not leviable on the facts found by the authorities below.

Final Conclusion: The impugned orders declining penalty were sustained, and no interference was called for in the Revenue's challenge.

Ratio Decidendi: Penalty under Section 11AC is attracted only where non-payment or short payment of duty is accompanied by fraud, collusion, wilful misstatement, suppression of facts, or contravention with intent to evade duty; mere pre-notice payment of duty without such intent does not by itself warrant penalty.

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