Penalty under excise law not sustainable after prior duty and interest payment under voluntary compliance provision

Penalty under Section 11AC of the Central Excise Act was held unsustainable because the duty and interest had already been paid, and the dispute was confined to penalty alone. Section 11A(2B) was treated as operating to regularise the prior payment and remove the statutory basis for invoking penalty. Authorities cited on job work and removal of inputs or by-products were noted, but they did not alter the result because the decisive factor was the earlier payment of duty with interest and the effect of voluntary compliance under the statute.

---

---

Issues: Whether penalty under Section 11AC of the Central Excise Act, 1944 was sustainable when the duty and interest had already been paid and the case was covered by Section 11A(2B) of the Central Excise Act, 1944.

Analysis: The dispute before the Tribunal was confined to penalty. The duty demand had already been paid with interest and had not been seriously contested in the appeal. In such a situation, Section 11A(2B) operated to treat the duty payment as final and the statutory foundation for invoking penalty under Section 11AC was not made out. The authorities relied upon by the parties on job work and removal of inputs or by-products were noted, but the decisive consideration was the prior payment of duty and interest together with the statutory effect of voluntary payment under Section 11A(2B).

Conclusion: Penalty under Section 11AC was not imposable and was set aside in favour of the assessee.

---