Pre-notice payment of excise duty and interest defeated penalty, leaving no basis even for reduced penalty.

Penalty was not sustainable where the assessee had already deposited the excise duty along with interest before issuance of the show cause notice. On that admitted position, the basis for penalty was not made out, and even the reduced penalty was held unjustified. The question of law was answered in favour of the assessee and against the department.

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Issues: Whether penalty could be sustained when the duty demand had already been discharged before issuance of the show cause notice.

Analysis: The assessee had deposited the excise duty along with interest prior to the issuance of the show cause notice. In view of that admitted position, the basis for imposing penalty was not made out and even the reduced penalty was held to be unjustified.

Conclusion: The question of law was answered in favour of the assessee and against the department; the penalty was not sustainable.

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