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of <h1>Payment after clandestine removal before notice doesn't bar Section 11AC penalty; Section 11(2C) permits notice issuance</h1> <h3>COMMISSIONI OF CENTRAL EXCISE, DELHI-III Versus MACHINO MONTELL (I) LTD.</h3> HC held that deposit of duty after clandestine removal and before issuance of a show cause notice does not preclude applicability of Section 11AC; the ... Central Excise - clandestine removal of finished goods without payment of duty - Duty paid prior to issue of show cause notice - applicability of Section 11AC - HELD THAT:- A perusal of Section 11AC provision shows that the said provision incorporates liability to pay penalty in the situations mentioned therein. Once a case is covered by the situation mentioned in the Section, mere deposit prior to issuance of show cause notice under Section 11A of the Act will not necessarily negate the situation mentioned in the said Section. Present case being governed by sub section 2C of Section 11, issuance of notice under Section 11 was not barred. Thus, applicability of Section 11AC is not excluded at the threshold merely on deposit of the amount after having been caught and before the issue of show cause notice. Issues:1. Alleged clandestine removal of finished goods without payment of duty.2. Imposition of penalty under Section 11AC.3. Applicability of penalty despite prior deposit of duty.4. Interpretation of statutory provisions regarding penalty.Analysis:1. The respondent, a manufacturer of polypropylene compounding, faced allegations of clandestinely removing finished goods without issuing invoices or paying duty. A show cause notice was issued under Section 11A of the Central Excise Act, 1944, seeking explanation for additional duty and penalty imposition.2. The adjudicating authority found the respondent guilty of surreptitious removal of goods without following prescribed procedures or paying duty. Despite depositing the duty before the show cause notice, a penalty of Rs. 1,12,900/- was imposed under Section 11AC. The Commissioner, Central Excise (Appeal), however, set aside the penalty citing the duty deposit before the notice issuance.3. The revenue contested the decision, arguing that the mere deposit of duty did not absolve the liability for penalty if there was an intent to evade payment. The Tribunal dismissed the revenue's appeal, emphasizing the importance of mens rea in penalty imposition.4. The court analyzed Section 11AC, which mandates penalties for non-payment of duty due to fraud, collusion, or wilful misstatement. The provision allows for reduced penalties if duty and interest are paid within a specified timeframe. The court clarified that depositing duty before a show cause notice does not automatically negate penalty liability under Section 11AC.5. The court referred to statutory provisions, including Section 11A, to determine the applicability of penalty despite duty deposit before notice issuance. The case was remanded to the Commissioner (Appeals) for a fresh decision on penalty imposition based on whether the non-payment of duty was due to fraudulent intent or contravention of excise laws.6. The court directed the parties to appear before the Commissioner (Appeals) for further proceedings, highlighting the importance of determining the circumstances leading to non-payment of duty and the intent behind such actions as per Section 11AC.
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