Rakesh Kumar Garg, J. - (1.) THE revenue has filed this appeal under Section 35(G) of the Central Excise Act 1944, challenging the order dated, 27th December, 2005 (Annexure P -3) passed by the Customs, Excise & Service Tax Appellate Tribunal, New Delhi (for brevity 'the Tribunal') whereby it has accepted the appeal of the Respondent herein and set aside the said order. In this appeal the revenue has raised the following substantial question of law: Whether penalty and interest can be waived in toto on the sole ground that duty has been deposited before issue of show cause notice when the Central Excise law does not provide for the same and especially when the Hon'ble Tribunal themselves has been distinguishing their ruling in the case of CCE v. Machino Montell (I) Ltd. ?
(2.) BRIEFLY stated, the facts of the case are that the assessee is engaged in the manufacturing of Plastic Sacks/Plastic fabric falling under Chapter 39 of the schedule of Central Excise Tariff Act, 1985 and is availing the facility of MODVAT credit on inputs. The Central Excise Preventive staff visited the factory of the assessee on 5.2.1999 and detected a shortage of 13280 kgs of inputs HDPE granules involving credit of Rs. 1,03,680; and further on scrutiny of MODVAT documents, the staff detected wrong availment of credit of Rs. 2,21,776 availed on invoices issued by M/s. Kosmo Plastic Exports Pvt. Ltd., Amritsar for which the Director of the Respondent admitted to have not received the material mentioned in the disputed invoices. The credit of Rs. 1,03,680 and Rs. 2,21,776 was deposited by the Respondent -assessee on 5.2.1999 itself. The assessee was issued show cause notice for demand of Central Excise duty of Rs. 1,03,680 leviable on inputs found short and MODVAT credit of Rs. 2,21,776 wrongly taken under Rule 9(2) of the Central Excise Rules, 1944 and that for adjustment of amount already paid by them towards payment of duty under Rule 57(1). Penal action under Section 11(C) of the Central Excise Act, 1944 read with Rule 9(2), 57(C), 57(1), 173 (Q) and 226 of the Central Excise Rules, 1944 was also proposed. The Adjudicating Authority vide order dated, 27th November, 2000 confirmed the demand already debited by the Respondent and imposed penalty of Rs. 25,000 under Rule 173(Q) on the assessee. The department filed an appeal before the Commissioner (Appeals) Central Excise, Jalandhar contending that the shortage of inputs and non receipt of input material were admitted by the Respondent -assessee and therefore, the penalty under Rule 57(1)(4) equal to MODVAT credit wrongly availed was to be imposed as the Respondent has taken MODVAT credit by fraud and willful mis -statement.
(3.) ON the other hand, the Respondent -assessee had submitted that it was a technical breach for which no penalty was imposable. The Commissioner (Appeals) Central Excise vide his order dated, 29.1.2004 modified the original order dated, 27th November, 2000 of the adjudicating authority and enhanced the penalty from Rs. 25,000 to Rs. 3,25,456 under Rule 57 (1) (5) of the Central Excise Rules 1944. The Commissioner (Appeals) Central Excise also ordered for charging of interest under Rule 57(1)(5) of the Central Excise Rules, 1944.;