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4. Before us, learned counsel for the Revenue submitted that the issue is decided by the Apex Court in their favour in the case of Union of India v. Dharmendra Textile Processors, 2008 (231) ELT 3 (SC) wherein it was held that penalty under section 11AC is required to be imposed without the necessity to prove mens rea. He submitted that merely because the assessee deposited the amount before issuance of show show cause notice would not mean that there was no intention to evade duty. He submitted that credit was reversed only after the Department started investigation.

5. On the other hand, counsel for the respondents submitted that the decision in the case of Dharmendra Textile Processors (supra) has since been considered and explained by the Apex Court in the case of Union of India v. Rajasthan Spining & Weaving Mills, 2009 (238) ELT 3 (SC) and our attention was drawn to para 18, 19 and 23 of the said judgment.

6. As already recorded, the Tribunal allowed the appeal of the respondent only on the ground that the credit was reversed before the issuance of show cause notice. To our mind, by virtue of decision in the case of Dharmendra Textile Processors (supra), this cannot be the sole ground for deleting the penalty. However, in view of the decision in the case of Rajasthan Spinning & Weaving Mills (supra), explaining the decision in the case of Dharmendra Textiles, other defences of the assessee shall have to be examined. In other words, if the assessee can establish that it had sufficient reasons for not paying the duty and that there was no intention to evade duty, question of penalty under section 11AC will have to be looked from that angle.