UNION OF INDIA vs M/S RAJASTHAN SPINNING & WEAVING MILLS

The Supreme Court clarified the conditions for imposing penalties under Section 11AC of the Central Excise Act, emphasizing that the mere short payment of duty does not automatically warrant a penalty if the duty is paid before the issuance of a show cause notice. The Court held that the Tribunal's decision to strike down the penalty was misconceived, as the liability for penalty is determined by the conditions specified in Section 11AC, irrespective of when the duty is paid. The Court ultimately ruled in favor of the Revenue, reinstating the penalty imposed by the Additional Commissioner.