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The revenue carried an appeal to the Hon'ble Supreme Court being C.A.No.1901 of 2008. The Hon'ble Supreme Court alongwith a number of other appeals set aside the order dated 14.9.2007 passed by this Court dismissing the appeal and remitted the matter back to this Court for disposal in the light of the judgement rendered in the case of Union of India v. Dharmendra Textile Processors 2008(231)ELT 3 (SC). Accordingly we proceed to decide the substantive question of law claimed by the revenue and the other one arising as per the directions of Hon'ble the Supreme Court which are as under:

The Hon'ble Supreme Court has set aside the view taken by the Division Bench of this Court and has remitted the matter to this Court for decision afresh in the light of the judgement in Dharmendra Textile Processors's case (supra). However, the view taken by the Hon'ble Supreme Court in Dharmendra Textile Processors's case (supra) has been explained and reconsidered in a later judgement of the Supreme Court in the case of Union of India v. Rajasthan Spinning and Weaving Mills 2009(238) ELT 3 (SC). While explaining the view taken in Dharmendra Textile Processors's case (supra) Hon'ble the Supreme Court has now clarified that penalty under Section 11AC of the Act is punishment for an act of deliberate deception by the assessee with an intent to evade duty by adopting any of the means mentioned in the Section. Therefore Dharmendra Textile Processors case (supra) is not an authority for the proposition that in every case of non payment or short payment of duty the penalty clause would automatically get attracted and that the authority had no discretion in the matter. In para 20 of the judgement rendered in the case of Rajasthan Spinning and Weaving Mills (supra) it has been observed that the aforesaid judgement cannot be read to mean that penalty provision under Section 11 AC of the Act would be attracted automatically in every case of non payment/ short payment of duty. It follows that the judgement in Dharmendra Textile Processors's case (supra) is not an authority that irrespective of the fulfillment of basic ingredients of Section 11 AC of the Act the penalty get attracted for non payment or short payment of duty. In paras 18 and 19 of the judgement in Rajasthjan spinning and Weaving Mills case (supra), it has been observed as under:

19. From the aforesaid discussion it is clear that penalty under section 11AC, as the word suggests, is punishment for an act of deliberate deception by the assessee with the intent to evade duty by adopting any of the means mentioned in the section."

Another 'strong' reason discovered in support of the aforesaid proposition set out by the Supreme Court in Rajasthan Spinning and Weaving Mills case (supra) is that such an interpretation was not even sought by the revenue in Dharmendra Textile Processors' case (supra).