ORDER
P.S. Bajaj (J), Member
1. In this appeal, the Revenue has contested only the setting aside of the penalty on the respondents under Section 11-AC through impugned order. The Commissioner (Appeals) has set aside the penalty on the respondents which was imposed by the adjudicating authority under Section 11-AC while confirming the demand of Rs. 7,02,826 on the ground that duty along with interest was deposited by them before the issuance of the show cause notice.
2. We have heard both the sides and gone through the record.
3. We find that during the year 1994-1995, M/s. Maruti Udyog Ltd. (for short MUL) imported moulds and fixtures under EPCG Scheme and supplied the same free of cost to the present respondents for manufacture of components meant for use in the manufacture of motor vehicles. The respondents manufactures the motor vehicle parts with the help of those moulds and fixtures. But M/s MUL failed to fulfill the obligation as required under the EPCG Scheme. The re-assessment of the bills of entry was done by the customs authorities and as a result thereof, the duty along with interest, was payable by M/s MUL. M/s MUL availed Cenvat credit on CVD and issued supplementary invoices in terms of Rule 57-S(1)(ii) of the Rules and respondents availed the modvat credit but it revealed that the respondents had not amortized the differential duties of customs and the interest that was paid by M/s MUL on account of default in EPCG and as such/could not avail the modvat credit.
4. The respondents no doubt paid the duty with interest before the issuance of show cause notice but that payment was not made by them voluntarily. It was paid by them only when they were caught by the department. If it had not been pointed out to them by the department of having wrongly availed the modvat credit, they would have continued to utilize the same illegally and avoided payment to the department.
5. Therefore, keeping in view of the fact and circumstances of the case, in our view, some penalty should have been imposed on them by the Commissioner (Appeals). The ratio of law laid down in the case of CCE v. Machino Montell (I) Ltd., 2004 (168) ELT 466 by the Larger Bench that where duty had been paid by the assessee before the issuance of show cause notice, no penalty can be imposed, is not attracted to the present case, as that was a case where duty was paid voluntarily.
6. In the light of the discussion made above, the impugned order of the Commissioner (Appeals) is modified and penalty of Rs. 70,000 is imposed on the respondents. The appeal of the Revenue accordingly stands allowed.