Penalty by corrigendum and pre-enactment interest demand were unsustainable where duty was voluntarily paid before the provision applied.

A corrigendum cannot be used to introduce a fresh penalty proposal under Rule 173Q after the noticee has already replied to the original show cause notice, and the penalty proposal was therefore not sustainable. Penalty was also held unwarranted on the facts because the clearances were made on budget day in the manner followed by the assessee and the differential duty was voluntarily paid, negating any deliberate duty evasion. Interest under Section 11AB could not be levied where the duty had been discharged before that provision came into force on 14-5-2001, so the interest demand was not recoverable. The penalty and interest demands were set aside.

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Issues: (i) Whether a corrigendum introducing a proposal for penalty under Rule 173Q of the Central Excise Rules, 1944 could be issued after the noticee had already replied to the original show cause notice; (ii) whether penalty was sustainable on the facts where the clearances were made on budget day and the assessee had voluntarily paid the differential duty; (iii) whether interest under Section 11AB of the Central Excise Act, 1944 could be upheld when the duty was discharged before the said provision came into force.

Issue (i): Whether a corrigendum introducing a proposal for penalty under Rule 173Q of the Central Excise Rules, 1944 could be issued after the noticee had already replied to the original show cause notice.

Analysis: The corrigendum was issued after the assessee had submitted its reply to the original notice. A corrigendum or addendum cannot be used to introduce a fresh penalty proposal at that stage.

Conclusion: The penalty proposal introduced by corrigendum was not sustainable.

Issue (ii): Whether penalty was sustainable on the facts where the clearances were made on budget day and the assessee had voluntarily paid the differential duty.

Analysis: The clearances were effected in accordance with the procedure followed on budget day, and the record did not establish a deliberate attempt to pay less duty. The duty differential was paid voluntarily, which negatived the basis for penalty.

Conclusion: Penalty under Rule 173Q of the Central Excise Rules, 1944 was not sustainable.

Issue (iii): Whether interest under Section 11AB of the Central Excise Act, 1944 could be upheld when the duty was discharged before the said provision came into force.

Analysis: Section 11AB had been introduced with effect from 14-5-2001, whereas the duty was paid on 16-3-2001. The provision therefore had no application to the amount already discharged.

Conclusion: Interest under Section 11AB of the Central Excise Act, 1944 was not recoverable.

Final Conclusion: The penalty and interest demands were set aside, and the appeal was allowed only to that extent while the duty demand was not pursued.

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