ORDER
P.G. Chacko, Member (J)
1. The respondents are manufacturers of steel ingots of Chapter 72 of the C.E.T.A. Schedule. On 23/06/2000, officers of Central Excise found a shortage of finished goods (16.244 MTs) in their factory after a physical verification of stock. The party paid up the duty of excise on the quantity found short. Subsequently, the department issued a Show Cause Notice on 07/06/2001 to demand duty on the above quantity and appropriate the above payment towards the same. The notice also proposed to change interest on duty under Section 11AB as also to impose penalty on the party under Section 11AC of the Central Excise Act. The Snow Cause Notice was contested. The Original Authority, which adjudicated the notice, confirmed against the party the demand of Rs. 27,938/- and appropriated the above payment towards such demand. The authority also demanded interest on duty under Section 11AB and also imposed a penalty of Rs. 27,938/- on the party under Section 11AC. In the appeal preferred by the aggrieved party, the Commissioner (Appeals) set aside the penalty. Hence this appeal by the Revenue.
2. Heard both sides. The D.R. reiterates the grounds of this appeal and relies on the Tribunal’s decision in Bharat Petroleum Corporation Ltd. v. C.C.E. Mumbai-II – 2002 (139) E.L.T. 382 (Tri.Mumbai). The respondent’s representative, Shri Anil Deshmukh, Manager (Commercial)submits that, as the duty was paid before issuance of the Show Cause Notice, it was not open to the Department to penalize the respondent under Section 11AC of the Act. He is relying on the Tribunal’s decision in Rashtriya Ispat Nigam Ltd. v. C.C.E. – 2003 (161) E.L.T. 285 (Tri. Bang.) which, it is submitted, stands affirmed by the Supreme Court. It is further submitted that the Show Cause Notice has not alleged the necessary facts for penalty under Section 11AC.
3. I have considered the submissions. Admittedly the duty was paid by the respondents as soon as the shortage of finished goods was detected by the Department. The Show Cause Notice in question was issued subsequently. In that notice, a penalty was proposed under Section 11AC of the Central Excise Act without attributing any fraud, collusion, suppression or mis-statement of facts to the party in relation to the discrepancy of stock found by the department in the factory. Section 11AC provides for penalty on the assessee who is found to have short-paid any duty or is found to have obtained erroneous refund of any duty on account of fraud, collusion, suppression of facts or mis-statement of facts with intent to evade payment of duty. These ingredients are sine qua non for a penalty under Section 11AC. None of these was alleged in the Show Cause Notice. For this very reason the penalty imposed on the party by the original authority under Section 11AC should have been vacated. I find that the lower appellate authority has vacated the penalty on a different ground. But this ground is untenable in view of the Tribunal’s decision in Rastriya Ispat Nigam Ltd. (Supra) cited on behalf of the respondent, wherein it was held that, where duty was deposited before issue of Show Cause Notice, no penalty was imposable under Section 11AC. It has also been pointed out that the appeal filed by the Department against the Tribunal’s decision in Rastriya Ispat Nigam Ltd. (supra) was dismissed by the Apex Court vide 2004 (163) E.L.T. A63. I uphold the impugned order vacating penalty on the party.
4. The appeal stands rejected.
(Dictated in court)