hvn IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION CENTRAL EXCISE APPEAL NO. 181 OF 2006 Commissioner of Central Excise ... Appellant Versus Pushkar Petro Products Ltd. ... Respondents Mr. J.B. Mishra for the Appellant. Ms. Shilpa Belani i/by Anil Belani for Respondents. CORAM : F.I. REBELLO & A.M. KHANWILKAR, JJ. DATED : OCTOBER 06, 2009 P.C. Appeal was admitted on the following questions : “(a) Whether the CESTAT was right in holding that penalty equivalent to duty as envisaged under section 11AC of the Central Excise Act, 1944 need not be applied in the instant case, despite the mandatory nature of Section 11AC and AB which leaves no discretion to the authorities. (b) Whether the CESTAT was justified in vacating the demand for penalty equal to duty under Section 11 AC and interest under section 11AB of the Central Excise Act, 1944 by confirming the order of Commissioner Appeal because the respondents paid the duty before issuance of Show Cause Notice which was being not voluntary but was made only after being pointed out by the Anti Evasion Officers of Pune II Commissionerate.” We have heard the learned counsel for the Appellant. The A.O. noted that the amount was paid only after issuance of show cause notice and therefore, does not fall strictly under the purview of voluntary payment and accordingly confirmed the penalty. The first appellate authority had been pleased to hold that the A.O. has dropped demand which was not sustainable and consequently interest under section 11AB and penalty under section 11AC cannot be imposed. However, proceeded to hold that the recovery of credit to Rs.1,19,325.40 is upheld but set aside the penalty imposed under section 11 AC and interest under section 11AB. Revenue aggrieved by the order preferred appeal to the tribunal. In so far as penalty and interest is concerned, the learned tribunal by the impugned order dated 25.11.2005 was pleased to hold that first appellate authority was justified in setting aside the penalty and interest under the provisos of section 11AC and 11AB on the ground that duty was deposited prior to show cause notice. Hence, the present appeal and the question framed. In our opinion, after the judgment of the Supreme Court in Dharmendra Textiles, once it is held that the duty was short paid or not paid, penalty is mandatory. However, that is subject to the observations in Rajasthan Spinning Mills that the predicates of section 11AC must be satisfied. Mere payment before show cause notice is not necessary. In these circumstances, the impugned order of the tribunal is set aside and the matter is restored to the file of the tribunal to decide the appeal preferred by the appellants herein as to whether the Commissioner (Appeal) was right in setting aside the penalty and interest considering requirement under section 11AC of the Act as also the provisions of Section 11AB. Appeal disposed of accordingly. (A.M. KHANWILKAR,J.) (F.I. REBELLO,J.)