Delayed excise duty payment still triggers penalty and interest, while pre-notice payment may only reduce the penalty quantum.

Excise duty paid after default but before issuance of the show cause notice did not extinguish liability under Section 11AC, because the relevant test is whether duty was paid at the correct time on clearance. Such later payment could only be considered as a mitigating factor in reducing the penalty, not as a bar to penal action. Delayed payment also attracted interest under Section 11AB. The reduced penalty fixed by the Tribunal was treated as a discretionary factual exercise and was left undisturbed.

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Issues: Whether penalty under Section 11AC of the Central Excise Act, 1944 and interest under Section 11AB of the Central Excise Act, 1944 could be sustained where the duty was paid before issuance of the show cause notice, and whether prior payment of duty barred invocation of the penal provisions though it could affect the quantum of penalty.

Analysis: The appellant had crossed the SSI exemption limit and had failed to pay duty at the time of clearance. The Court held that what matters for attracting Section 11AC is whether the duty payable under the Act was paid at the correct time, and not whether it was deposited later before notice. Payment made after default but before show cause notice does not erase the breach; it may only serve as a mitigating circumstance while fixing the quantum. The Court further held that delayed payment of duty attracts interest under Section 11AB. The reduction of penalty by the Tribunal to Rs. 50,000 was treated as an exercise of discretion based on the facts, and no interference was warranted.

Conclusion: Penalty under Section 11AC and interest under Section 11AB were rightly upheld, and prior payment before the show cause notice did not preclude penal action. The reduced penalty was sustained.

Final Conclusion: The appeal failed, and the Revenue's position on liability to penalty and interest was affirmed, with the reduced penalty remaining intact.

Ratio Decidendi: Where excise duty is not paid at the time of clearance and is paid only later, Section 11AC is attracted notwithstanding payment before the show cause notice, while such pre-notice payment may only justify reduction in the quantum of penalty and does not eliminate liability to interest under Section 11AB.

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