Delayed duty disclosure and interest payment defeated evasion penalties, but a limited penalty remained for technical non-compliance.

Delayed excise duty disclosed in the ER-1 return and paid with interest was treated as a payment default, not as suppression or intent to evade duty, so penalties under Rule 25 against the company and Rule 26 against the director were not sustainable. The same delayed payment nevertheless constituted a technical contravention of the rules, which justified a limited penalty under Rule 27 on the company. The director was granted complete relief. The governing principle was that belated payment accompanied by disclosure and interest defeats evasion-based penalties, while a reduced penalty may still apply for the underlying non-compliance.

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Issues: (i) Whether penalty under Rule 25 of the Central Excise Rules, 2002 and Rule 26 of the Central Excise Rules, 2002 was sustainable for delayed payment of monthly duty along with interest; (ii) Whether any penalty could be imposed for the admitted delay in payment of duty.

Issue (i): Whether penalty under Rule 25 of the Central Excise Rules, 2002 and Rule 26 of the Central Excise Rules, 2002 was sustainable for delayed payment of monthly duty along with interest.

Analysis: The delayed duty liability had been declared in the ER-1 return, and the duty was ultimately paid along with interest. On these facts, the delay was treated as a default in payment rather than a case of suppression of facts or intention to evade duty. The consequence of late payment was held to be governed by the scheme of Rule 8, under which the assessee remained liable to interest for delay.

Conclusion: Penalty under Rule 25 on the company and penalty under Rule 26 on the director were not sustainable.

Issue (ii): Whether any penalty could be imposed for the admitted delay in payment of duty.

Analysis: Although no mala fide intention or suppression was found, the delayed payment itself amounted to a contravention of the rules. The default was therefore treated as a technical breach attracting a limited penalty for non-compliance, without treating the case as one involving evasion.

Conclusion: A limited penalty under Rule 27 was upheld and imposed on the company.

Final Conclusion: The company obtained relief from the substantive penalties, while a reduced penalty was sustained for the delayed payment; the director was granted complete relief.

Ratio Decidendi: Where duty is paid belatedly but disclosed in the statutory return and accompanied by interest, absence of suppression or intent to evade duty negatives penalties predicated on evasion, though a limited penalty may still be imposed for the underlying contravention.

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