M.M. Kumar, J. - (1.) This appeal filed by the appellant -revenue under Sec. 35G of the Central Excise Act, 1944 (for brevity, 'the Act'), challenges order dated 1.6.2006, passed by the Customs, Excise and Service Tax Appellate Tribunal, New Delhi (for brevity, 'the Tribunal). It has been claimed that the following questions of law would arise for determination of this Court: (i) Whether equal penalty under Sec. 11AC is liable to be imposed on the assessee in those cases which fall under the purview of Explanation (1) to Sub -section 2(B) of Sec. 11A of the Central Excise Act, 1944, where duty has been deposited before issue of show cause notice? (ii) Whether the CESTAT is justified in waiving the penalty imposed on the Director of the party under Rule 26 of the Central Excise Rules particularly when he had admitted the shortage of the goods detected by the Central Excise Staff and the clandestine removal of the goods could not be carried out without his knowledge and connivance?
(2.) M/s Omkar Steel Tubes (P) Limited are registered under the Central Excise. It is engaged in the manufacture of Non -Alloy Steel Pipes falling under sub -heading 7306 -90 of the Central Excise Tariff Act, 1985. The Central Excise Prevention Staff when visited the factory of the respondent, had detected a shortage of 59.730 MT of stocks of steel pipes (steel scrap) valued at Rs. 13,14,600/ -, which involve the incidence of duty amounting to Rs. 2,14,455/ -. The above shortage was conceded by respondent No. 2 who is the Director of the Company -respondent No. 1 and deposited the amount of Rs. 2,14,455/ -. A show cause notice for confirming duty under Sec. 11A of the Act, charging of interest under Sec. 11AB of the Act and proposing penalty under Sec. 11AC of the Act, was issued to the Company -respondent No. 1. The Adjudicating Authority in his Order -in -Original, dated 13.8.2005, confirmed the duty of Rs. 2,14,445/ -under Sec. 11A of the Act and the amount since already paid was ordered to be appropriated. He also imposed a penalty of Rs. 10,000/ -on respondent No. 1 under Rule 25 of the Central Excise Rules, 1944, and a penalty of Rs. 10,000/ -was also imposed on the Director -respondent No. 2 (P -1).
(3.) On appeal filed by the assessee -respondent, the Commissioner (Appeals), vide his order dated 13.2.2006, set aside the penalty imposed on respondent Nos. 1 and 2 by upholding the demand of duty which was deposited by the assessee -respondent No. 1 before issuance of show cause notice (P -2). The appellant -revenue challenged the order on further appeal to the Tribunal. The appeal was dismissed vide order dated 1.6.2006 by adopting the rationale that once the amount of duty has been paid before the issuance of show cause notice then no penalty was leviable. The Tribunal in that regard placed reliance on its larger bench decision in the case of Machino Montell, 2004 (62) RLT 709;