Mandatory penalty under Rule 57-I(4) was not attracted where duty was paid before the show cause notice.

Mandatory penalty under Rule 57-I(4) of the Central Excise Rules, 1944 was not attracted because the duty had already been paid before issue of the show cause notice, so the statutory conditions for invoking that penalty were absent. The appellate authority's reduction of penalty from the amount equal to the disallowed Modvat credit to a lesser sum was therefore left undisturbed, and the Revenue's challenge to that reduction failed. In the absence of any cross-objection by the assessee, the reduced penalty was treated as accepted.

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Issues: Whether the reduction of penalty under Rule 57-I(4) of the Central Excise Rules, 1944 was justified when the duty had been paid before the show cause notice was issued.

Analysis: The appellate authority had reduced the penalty from the amount equal to the disallowed Modvat credit to a lesser sum, and the Revenue challenged only that reduction. For invoking the mandatory penalty contemplated by Rule 57-I(4), the circumstances specified in the sub-rule had to exist. Since the duty had already been discharged before the show cause notice, those circumstances were held not to be present. In the absence of any cross-objection by the assessee, the reduced penalty was treated as accepted by the party.

Conclusion: The reduction of penalty was not interfered with and the Revenue's appeal failed.

Ratio Decidendi: Mandatory penalty under Rule 57-I(4) is not attracted where the duty is paid before issuance of the show cause notice and the statutory conditions for its invocation are absent.

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