Per Justice K.K. Usha : The issue raised for consideration before the Larger Bench is whether penalty under Section 11AC is liable to be imposed on the assessee or whether interest under Section 11AB is liable to be levied on duty, in cases where the duty has been deposited by the assessee before issue of show cause notice. It is contended by the ld. counsel on behalf of the assessee that since they have deposited the duty amount before issue of show-cause notice, penalty under Section 11AC can not be imposed. In support of the above contention, reliance was placed on the following decisions of the Tribunal:-

(1) Ashok Leyland Ltd. Vs. CCE, Chennai [2003 (55) RLT 816 (CEGAT-Chennai)]

(2) Rashtriya Ispat Nigam Ltd. Vs. CCE [2002 (54) RLT 317 (CEGAT-Ban.)=2003 (161) ELT 285 (Tribunal-Bang.)]

2. The Revenue, on the other hand, submitted that when fraud, collusion or wilful mis-statement or suppression of facts, etc. are alleged against the assessee, penalty under Section 11AC can be imposed irrespective of the fact that the assessee has deposited the duty before issue of show cause notice. In support of their contention, reliance was placed on the following three decisions:-

(1) Elephanta Gases Ltd. Vs. CCE, Pune-I [2003 (55) RLT 957 (CEGAT-Mum.)=2003 (155) ELT 42 (Tribunal-Mumbai)]

(2) Indian Oil Blending Ltd. Vs. CCE, Kolkata-I [2002 (53) RLT 224 (CEGAT-Kol.)

(3) Bharat Seats Ltd. Vs. CCE, Delhi-III [2003 (157) ELT 464 (Tribunal-Del.)

3. It was in view of the conflicting decisions by different benches of the Tribunal, the Learned Single Member referred the matter for consideration by a Larger Bench.

4. When the case was taken-up for hearing, ld. Counsel on behalf of the respondent/assessee brought to our notice a decision of the Karnataka High Court in CCE, Mangalore Vs. Shree Krishna Pipe Industries [2004 (61) RLT 17 (Kar.)] rejecting a reference application made by the Revenue against an order passed by this Tribunal holding that interest and penalty are not leviable when duty has been paid before issuance of show-cause notice. The relevant portion of the order reads as under:-

"The Tribunal allowed the appeal by the following short order dated 23.4.2003:

This appeal arises out of and is directed against the impugned order in appeal No. 656/2003-CE dated 28.10.2002 passed by the Commissioner of Customs Central Excise (Appeals), Bangalore.

2. Smt. Vijaya Prakash, learned Advocate appearing for the appellants submitted that the issue relates to imposition of penalty under Section 11-AC under Rule 173Q, apart from demand of interest in terms of Section 11-AB of the Central Excise Act, 1944. She submitted that since the disputed duty amount has already been deposited by the party even before the issue of show cause notice, imposition of penalty is not justified. In support of her contention, she referred to the decision of the Tribunal in the case of Rashtriya Ispat Nigam Ltd. Vs. CCE, Visakhapatnam, reported in 2003 (54) RLT 317 (CEGAT-Ban.).

3. Taking into consideration of the facts and circumstances of the case and following the ratio of the aforesaid decision of the Tribunal, we accept the contention of the party. Accordingly, the appeal is allowed with consequential relief."

2. Feeling aggrieved, Department has filed this petition under Section 35H of the Act seeking a direction to the Tribunal to refer the following questions of law to this Court:

"(1) Whether it was correct and proper for the Tribunal to have vacated the penalties imposed under Rules 9(2), 52(A), 173(Q), 226 and 209(A) of the Central Excise Rules, 1944 and Section 11AC without any justifiable or legal reason whereas the penalties were imposed in accordance with law;

(2) Whether it was correct for the Tribunal to vacate the demand for interest made in terms of valid, mandatory and explicit legal provisions contained in Section 11-AB; and

(3) Whether Tribunal could pass an order without examining the issues involved, following the ration of a case involving d