Prior disclosure and part-payment limited penalty, but undisclosed earlier duty remained demandable despite the limitation plea.

Prior disclosure and suo motu payment protected only the amount reflected in the RT-12 return under Section 11A(2B) of the Central Excise Act, 1944; the earlier undisclosed period remained subject to suppression, so the duty demand was not time barred. Penalty under Section 11AC was unsustainable to the extent of the amount already paid and disclosed, because suppression was not established for that portion. Personal penalty was also deleted, as mala fide intent or proven abetment was not established.

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Issues: (i) whether the duty demand was barred by limitation in view of disclosure and prior payment; (ii) whether penalty under the Central Excise law and personal penalty were sustainable.

Issue (i): whether the duty demand was barred by limitation in view of disclosure and prior payment.

Analysis: The period of demand was 1 April 1997 to 28 July 1999, while the show cause notice was issued on 2 May 2002. The record showed that the assessee had suo motu debited a part of the duty liability in July 1999 and reflected the same in the RT-12 return, but there was no disclosure or payment for the earlier period. On that basis, the suppression alleged by the department was held to exist for the past period. The demand was therefore not treated as time barred, and the part-payment already made was regarded as falling within the saving provision under Section 11A(2B) of the Central Excise Act, 1944.

Conclusion: The demand was held to be maintainable, and the plea of limitation failed.

Issue (ii): whether penalty under the Central Excise law and personal penalty were sustainable.

Analysis: Penalty under Section 11AC of the Central Excise Act, 1944 was held unsustainable to the extent of the amount already paid suo motu and disclosed in the RT-12 return, because there was no suppression in relation to that amount. As regards the personal penalty, the nature of the dispute and the absence of mala fide intention or proven abetment were taken into account, and the personal penalty was found not proved.

Conclusion: The penalty under Section 11AC was set aside for the amount already paid, and the personal penalty was deleted.

Final Conclusion: The assessee's appeal succeeded in part: the demand survived, but the penalty was curtailed and the personal penalty was removed.

Ratio Decidendi: Prior disclosure and suo motu payment negate suppression only to the extent of the disclosed amount, while undisclosed liability for the earlier period permits confirmation of demand and denial of full penalty.

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