TaxTMI 
TaxTMI 
2014 (1) TMI 1338
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....wed, whereby the demand of duty was confirmed and the penalty and interest were set aside. This appeal has been admitted on the following substantial question of law:- "Whether or not the CESTAT was in error in holding that the penalty imposed under Section 11AC and the interest charged under Section 11AB of the Central Excise Act, 1944, are not sustainable if the duty is paid before issuance of show cause notice irrespective of the fact that evasion of duty was detected by the department and the demand was made under the proviso to Section 11A(1) on reason of suppression of facts or wilful misstatement of contravention of the provisions of Central Excise Act and Rules made there under with intent to evade payment of duty? 2. The respond....
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....d before issuance of show cause notice irrespective of the fact that evasion of duty was deducted by the department and the demand was made under proviso to Section 11A(1) on reason of suppression of facts or willful misstatement or contravention of the provisions of Central Excise Act. 4. We have heard the learned counsels appearing on either side and perused the materials available on record. 5. To answer the substantial question of law framed for consideration, two issues have to be dealt with; firstly as to whether mere payment of duty prior to issuance of show cause notice would absolve the assessee from the levy of penalty and interest. If the first issue is answered against the assessee, then as to whether under what circumstan....
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....ssion of facts, or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty, the person who is liable to pay duty as determined under sub-section (2) of section 11-A, shall also be liable to pay a penalty equal to the duty so determined; Provided that where such duty as determined under sub-section (2) of Section 11-A, and the interest payable thereon under section 11-AB, is paid within thirty days from the date of communication of the order of the Central Excise Officer determining such duty, the amount of penalty liable to be paid by such person under this Section be twenty-five per cent, of the duty so determined: Provided further that the benefit of reduced penalty under the....
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....h person. 8. The said provision stands attracted where any duty of excise has not been levied or paid or has been short-levied or short-paid by reason of fraud, collusion or any willful mis-statement or suppression of facts or contravention of any of the provisions of the Act or the Rules made thereunder with intent to evade payment of duty. Thus, the pre-requisite being there should be material to establish either fraud, collusion or willful misstatement or suppression of facts or contraventions of the provisions of the Act and all these to have been committed with an intent to evade payment of duty. 9. The Hon'ble Supreme Court in the case of Union of India vs. Rajasthan Spinning and Weaving Mills (supra) pointed out that the decisi....
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....e finding that there was an intent to evade payment of duty by suppressing the materials facts or by making willful mis-statement or by committing fraud or collusion. Thus, in the absence of any such specific allegation in the show cause notice, the authorities cannot mechanically impose penalty under Section 11AC of the Act. After the assessee submitted their explanation, the Adjudicating Authority while passing the order dated 24.09.2002, only observed that there is possible manipulation of scrap accounts to show higher production than what would have been normally produced and there is no finding that the first respondent/assessee was guilty of willful mis-statement or suppression of facts or act of fraud with an intention to evade payme....