No Penalty Imposed When Duty and Interest Paid During Audit: CESTAT [Read Order]
Referring to the CESTAT Ahmedabad Bench's ruling in M & B Engineering Limited vs. CCE- dated July 4, 2024, the tribunal concluded that penalty cannot be imposed if the dues are settled during the audit
![No Penalty Imposed When Duty and Interest Paid During Audit: CESTAT [Read Order]](https://www.taxscan.in/wp-content/uploads/2025/03/No-Penalty-Duty-Interest-Paid-During-Audit-CESTAT-taxscan.jpg "No Penalty Imposed When Duty and Interest Paid During Audit: CESTAT [Read Order]")
The Ahmedabad Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) ruled that no penalty is applicable when duty and interest are paid during an audit. Tenneco Automotive India Pvt Ltd,appellant-assessee, paid duty and interest during the audit after the audit team identified certain dues. The issue was whether a penalty was still applicable. The assessee's counsel...
The Ahmedabad Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) ruled that no penalty is applicable when duty and interest are paid during an audit.
Tenneco Automotive India Pvt Ltd,appellant-assessee, paid duty and interest during the audit after the audit team identified certain dues. The issue was whether a penalty was still applicable.
The assessee's counsel cited the CESTAT Ahmedabad Division Bench's ruling in M & B Engineering Limited vs. CCE-Ahmedabad-II (Final Order No. 11487 of 2024 dated July 4, 2024), which stated that no penalty was applicable if duty and interest were paid during the audit. In response, the Authorized Representative maintained the lower authorities' findings.
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In the M & B Engineering case, the assessee had failed to pay service tax on Business Auxiliary Service, mistakenly believing it was exempt under Notification 18/2009-ST. After the audit identified the error, the assessee paid Rs. 7,81,872/- in tax and Rs. 6,51,275/- in interest on April 8, 2015, before the Show Cause Notice was issued on December 30, 2015. According to Section 73(3) of the Finance Act, 1994, the Show Cause Notice should not have been issued, and the penalty was consequently removed. The tribunal ruled that since the duty and interest were paid during the audit, no penalty was warranted, affirming the legal decisions cited by the assessee.
A single member bench comprising Somesh Arora (Judicial Member) agreed with the assessee's counsel that no penalty was required if duty and interest were paid during the audit. It noted that an audit was part of the assessment process, not an enforcement action.
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Shanker Patil appeared as the appellant counsel and Anand Kumar appeared as the respondent counsel.
In short,the appeal filed by the assessee was allowed.
To Read the full text of the Order CLICK HERE
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