Bona fide duty default defeated penalty where dishonoured cheque was followed by prompt payment with interest and no intent to evade.

Penalty under the Central Excise law was held inapplicable where duty payment by cheque failed due to dishonour, but the assessee deposited the duty with interest immediately on learning of the default. The Tribunal treated the non-payment as a bona fide mistake and found no intent to evade duty, even though removal had occurred without payment under the excise rules. The High Court accepted these findings as factual, held that no substantial question of law arose, and upheld deletion of the penalty.

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Issues: Whether penalty under Section 11AC of the Central Excise Act, 1944 was payable where duty was deposited after dishonour of the cheque and the Tribunal found the default to be a bona fide mistake without intent to evade duty.

Analysis: The Tribunal found that the cheque issued towards duty payment was dishonoured, but the assessee deposited the duty along with interest on coming to know of the dishonour. On those facts, the Tribunal held that although there had been removal without payment of duty under Rule 8 of the Central Excise Rules, 2002, the case did not attract Section 11AC because there was no intent to evade payment of duty. The High Court treated these findings as findings of fact based on appreciation of evidence and held that no substantial question of law arose.

Conclusion: Penalty under Section 11AC was not attracted, and the Tribunal's deletion of the penalty was upheld.

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