Pre-show-cause duty payment bars excise penalty, and personal liability requires direct responsibility for the default.

Where the duty liability is discharged before issuance of the show cause notice, penalty and interest under the central excise penal provisions are not sustainable, and penalty under Section 11AC, Section 11AB and Rule 173Q was therefore set aside. The Tribunal further held that personal penalty on a company secretary requires proof of direct responsibility for the excise default; as his role was confined to administration and not day-to-day excise matters, the penalty on him was also set aside. Both appeals succeeded and consequential relief followed.

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Issues: (i) whether penalty under Section 11AC of the Central Excise Act, 1944 was leviable when the duty had been paid before issuance of the show cause notice; and (ii) whether penalty was sustainable on the company secretary under the excise penal provision.

Issue (i): Whether penalty under Section 11AC of the Central Excise Act, 1944 was leviable when the duty had been paid before issuance of the show cause notice.

Analysis: The Tribunal followed its earlier consistent view that where the duty demand is discharged before issue of the show cause notice, penalty and interest under Sections 11AC and 11AB of the Central Excise Act, 1944, as well as penalty under Rule 173Q of the Central Excise Rules, 1944, are not warranted. It also held that allegations of suppression or fraud did not alter that result in the circumstances considered.

Conclusion: Penalty under Section 11AC was set aside and the finding was in favour of the assessee.

Issue (ii): Whether penalty was sustainable on the company secretary under the excise penal provision.

Analysis: The Tribunal found that the secretary's role was confined to administration and that he was not responsible for the day-to-day excise matters of the company. On that basis, his personal penalty could not be sustained.

Conclusion: The penalty imposed on the company secretary was set aside and the finding was in favour of the assessee.

Final Conclusion: Both appeals succeeded and the penalties on the company and its secretary were annulled, with consequential relief according to law.

Ratio Decidendi: When the duty liability is discharged before the show cause notice, penalty and interest under the relevant central excise penal provisions are not sustainable, and personal penalty requires proof of direct responsibility for the offending excise conduct.

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