Clandestine removal penalty and reduced penalty relief upheld where post-detection duty payment did not erase liability.

Clandestine removal and suppression of duty liability justified penalty even though duty was paid after department detection and before the show-cause notice, because such post-detection payment did not amount to voluntary compliance and did not erase penalty or interest exposure. The Court also rejected the defect-in-notice challenge as it had not been raised at the proper stage. At the same time, the assessee was held entitled to the concessional penalty of 25% of the duty determined, since the adjudication order itself allowed that benefit and the payment period had to be applied in a manner that preserved appellate remedies. Time for payment was therefore permitted from receipt of the court's order.

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Issues: (i) Whether penalty on account of clandestine removal and suppression of duty liability was justified despite payment of duty before the show-cause notice. (ii) Whether the assessee was entitled to the benefit of reduced penalty at 25% of the duty determined and, if so, from when the period for payment would run.

Issue (i): Whether penalty on account of clandestine removal and suppression of duty liability was justified despite payment of duty before the show-cause notice.

Analysis: The liability arose from admitted clandestine removal of excisable goods without payment of duty. The duty was paid only after detection by the department, which negatived any plea of voluntary compliance. In such circumstances, prior payment before issuance of the show-cause notice did not extinguish exposure to penalty and interest. The Court also found no merit in the challenge to the penalty merely because the show-cause notice was alleged to be defective, as that contention had not been raised at the appropriate stage.

Conclusion: The penalty was rightly imposed and the challenge to the levy failed.

Issue (ii): Whether the assessee was entitled to the benefit of reduced penalty at 25% of the duty determined and, if so, from when the period for payment would run.

Analysis: The adjudication order itself contemplated reduced penalty of 25% if the duty determined was paid within the prescribed time. Since the duty had already been paid earlier, the assessee was held entitled to that concessional benefit. The Court further held that the right to pursue statutory appeals could not be defeated by insisting that the reduced penalty must be paid within 30 days of the adjudication order; the period was to be computed from the time the matter attains finality. Accordingly, the assessee was permitted to make payment within 30 days from receipt of the court's order.

Conclusion: The assessee was held entitled to the reduced penalty benefit, with time to pay running from receipt of the court's order.

Final Conclusion: The appeal did not succeed on the core challenge to penalty, but limited relief was granted by preserving the assessee's entitlement to pay reduced penalty at 25% of the duty determined within the time allowed by the Court.

Ratio Decidendi: Clandestine removal and suppression of duty liability justify penalty even where duty is paid after detection and before the show-cause notice, while a statutory concessional penalty clause cannot be read so as to curtail the right of appeal and must be worked in a manner that preserves appellate remedies.

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