Judgment 1. We have heard learned counsel appearing for the parties. 2. This Central Excise Appeal under Section 35-G of the Central Excise Act, 1944 (for short, 'the Act'), filed by the Commissioner of Central Excise, Jaipur, was admitted on the following substantial question of law:- “Whether the Tribunal can override the statutory provisions enshrined in the law in as much as the second proviso to Section 11AC of Central Excise Act, 1944, has been ignored in reducing the penalty wherein specific provisions are enlisted that the benefit of reduced penalty shall be available only when penalty is paid within 30 days of the date of communication of the Order which is not the case in the present matter?” 3. It is submitted by learned counsel appearing for the Central Excise Department that in the present case, the assessee is engaged in manufacturing of PVC Leather cloth. On 22.01.2002, the Central Excise Officers visited the factory premises of the appellant and conducted stock verification, in which they detected shortage of inputs and finished goods involving central exercise duty of Rs.1,23,400/-. The authorized signatory of the appellant-Company admitted the shortage. He stated that the said quantity was cleared from their factory. They have also deposited the entire amount of duty on 21.01.2002 and 02.02.2002. On 9/10th July, 2002, the Central Excise Officers intercepted a truck carrying finished goods of the appellant-Company without accompanying any central excise invoice. The appellants deposited the entire amount of duty on the goods cleared of Rs. 19,522/-. A shortage of input credit of Rs.47,648/- was detected during stock verification on that day. Two show cause notices were issued in respect of demand of duty and imposition of penalty. The Original Authority confirmed the demand duty of Rs. 1,90,570/-, and imposed penalty of equal amount. The Commissioner (Appeals) upheld the adjudication order. 4. The Tribunal, relying on the judgments of this High Court in Arora Products Vs. Addl. Commr. Of Central Excise, 2009(235) ELT 818(Raj.), the Punjab & Haryana High Court in Commissioner of Central Excise, Delhi Vs. Machino Montell(I) Ltd., 2006(202) ELT 398 (P&H), and the Delhi High Court in CCE Vs. The Commissioner (Appeals) upheld the adjudication order. 4. The Tribunal, relying on the judgments of this High Court in Arora Products Vs. Addl. Commr. Of Central Excise, 2009(235) ELT 818(Raj.), the Punjab & Haryana High Court in Commissioner of Central Excise, Delhi Vs. Machino Montell(I) Ltd., 2006(202) ELT 398 (P&H), and the Delhi High Court in CCE Vs. Malbro Appliances P.Ltd., 2007 (208) ELT 503(Del.), and relying upon the first Proviso to Section 11AC of the Act, held that the Act provides for penalty of 25%, if duty demanded, is paid within 30 days of the order, and accordingly reduced the penalty to Rs.47,643/-, i.e. 25% of the duty amount. 5. Learned counsel appearing for the Central Excise Department, submits that the Tribunal has committed a gross error of law, inasmuch as the reduction of the amount of duty to 25% under the first Proviso to Section 11AC of the Act is on payment of penalty, liable to be paid by such person, within 30 days from the date of communication of the order of the Central Excise Officer, determining the duty. The unamended provisions of Section 11AC of the Act, which were subsequently amended by the Act No.10 of 2000, were clear that the reduction of duty to 25% is available, where duty is determined under sub-section (2) of Section 11 and interest payable under Section 11AB of the Act, is paid within 30 days from the date of communication of the order of the Central Excise Officer, determining such duty, and not from the date of issuance of the show cause notice. The unamended Section 11AC with its first Proviso, is quoted as below:- “(2B) Where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded, the person, chargeable with the duty, may pay the amount of duty (on the basis of his own ascertainment of such duty or on the basis of duty ascertained by a Central Excise Officer) before service of notice on him under sub-section (1) in respect of the duty, and inform the Central Excise Officer of such payment in writing, who, on receipt of such information shall not serve any notice under subsection (1) in respect of the duty so paid: Provided that the Central Excise Officers may determine the amount of short payment of duty, if any, which in his opinion has not been paid by such person and, then, the Central Excise Officer shall proceed to recover such amount in the manner specified in this section, and the period of “one year” referred to in sub-section (1) shall be counted from the date of receipt of such information. Explanation 1.- Nothing contained in this subsection shall apply in a case where duty was not levied or was not paid or was short-levied or was short paid or was erroneously refunded by reason of fraud, collusion or any willful misstatement or suppression of facts, or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty.” 6. The central excise duty is payable on the manufacture of excisable goods. It is not payable on the issuance of the show cause notice, or at any time thereafter. The Proviso to Section 11AC is applicable, if the payment is made within 30 days of communication of the order levying penalty, and not from the date of issuance of the show cause notice. 7. The reliance placed by learned counsel appearing for the assessee on Rashtriya Ispat Nigam Ltd. Vs. CCE, Visakhapatnam, 2003 (54) RLT 317 (CEGAT-Bangalore), and CCE, Madras Vs. JKON Engineering (P) Ltd., 2005(67) RLT 157(Madras), is entirely misplaced. In Rashtriya Ispat Nigam Ltd. Vs. CCE, Visakhapatnam(supra), a decision by the CEGAT, first Proviso to the unamended Section 11AC was not considered. The judgment was rendered on equity, which is not applicable to the laws relating to central excise. JKON Engineering (P) Ltd., 2005(67) RLT 157(Madras), is entirely misplaced. In Rashtriya Ispat Nigam Ltd. Vs. CCE, Visakhapatnam(supra), a decision by the CEGAT, first Proviso to the unamended Section 11AC was not considered. The judgment was rendered on equity, which is not applicable to the laws relating to central excise. The observation that since duty was deposited prior to the show cause notice, penalty could not be levied, is contrary to the principles settled in the central excise laws. 8. The question of law is, thus, decided in favour of the Central Excise Department, and against the assessee. The Department will proceed accordingly to issue demand. 9. The appeals are allowed. 10. A copy of the judgment be placed in the connected files.