Prior payment of duty with interest before notice makes a later same-demand unsustainable, and related penalties also fail.

Where an assessee had already admitted liability, paid the duty with interest, and informed the department before issue of the show cause notice, a later demand for the same duty and interest was held unsustainable because no further amount remained recoverable. As the principal demand itself could not stand, the penalty imposed on the assessee and the co-noticee also failed. The demand and penalties were therefore set aside, with the assessee's appeal allowed and the Revenue's appeal dismissed.

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Issues: Whether the demand and penalty could be sustained after the assessee had admitted liability and deposited the duty with interest, and whether the penalty imposed on the assessee and the co-noticee could survive.

Analysis: The admitted factual position was that the assessee had acknowledged the liability, deposited the duty amount with interest, and informed the department before the issuance of the show cause notice. In these circumstances, the subsequent notice demanding the same duty and interest was held to be not tenable, as no further amount remained recoverable. Once the principal demand itself was unsustainable, the penalties imposed on the assessee and the co-noticee also could not survive.

Conclusion: The demand and penalties were set aside and the assessee's appeal was allowed, while the Revenue's appeal was dismissed.

Final Conclusion: The dispute was finally resolved in favour of the assessee by holding that the duty liability having already been discharged with interest before notice, no further recovery or penal consequence could be sustained.

Ratio Decidendi: Where duty and interest have been voluntarily paid and the department informed before issuance of notice, a subsequent show cause notice for the same amount is unsustainable and penalties founded on that demand cannot stand.

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