Tribunal Upholds Penalty for Late Duty Payment Despite Early Settlement

The Tribunal found that despite the appellants paying the duty and interest before the show cause notice, a penalty was justified as the duty was not paid on the specified due date. The Tribunal referenced a Supreme Court decision supporting this stance. The appellants' argument that no penalty should apply if duty is paid before the notice was rejected as the duty payment was prompted by Departmental officers, not voluntary. The Tribunal imposed a reduced penalty of Rs. 1,20,000 for contravening Central Excise Rules.

---

---

Issues: Imposition of penalty under Section 11AC of the Central Excise Act, 1944 for non-payment of duty on time.

In this case, the appellants had deposited the entire duty amount along with interest before the issuance of the show cause notice. The appellants contested the imposition of penalty equivalent to the duty amount and an additional penalty of Rs. 25,000. The counsel for the appellants relied on a decision of the Larger Bench of the Tribunal, which held that if duty is paid before the show cause notice, no penalty can be imposed under Section 11AC of the Central Excise Act. However, the Departmental Representative argued that duty was payable on an installment basis under Rule 8 of the Central Excise Rules, 2002, and since the duty was not paid on time, penalties were justified.

The Tribunal acknowledged that the appellants had paid the entire duty and interest before the issuance of the show cause notice. Despite this, the Tribunal found that penalty was imposable as the duty was not paid on the specified due date as required by Rule 8 of the Central Excise Rules, 2002. The Tribunal referenced a Supreme Court decision which dismissed an appeal by the Revenue against a similar Tribunal decision, stating that if duty is paid voluntarily by the assessee, no penalty can be imposed. The Tribunal noted that the duty was paid only after being pointed out by Departmental officers, not voluntarily, as claimed by the appellants.

The Tribunal held that as the appellants had contravened Rule 25 of the Central Excise Rules, 2002, a penalty was indeed imposable. However, considering the high quantum of the penalty, the Tribunal reduced it to Rs. 1,20,000. The appeal was disposed of with the imposition of the reduced penalty amount.

---