Section 11AC penalty fails where duty is paid and the lapse is only procedural, without intent to evade duty.

Penalty under Section 11AC of the Central Excise Act, 1944 was held inapplicable where duty had already been paid, the clearance documents recorded the relevant particulars, and the lapse was only procedural. The record showed invoices and weighing slips, and the authority had found no intention to evade duty. Because the only default was failure to debit the duty amount before clearance, without fraud, collusion, wilful misstatement, or suppression of facts, the statutory conditions for imposing Section 11AC penalty were not met. The penalty was therefore vacated.

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Issues: Whether penalty under Section 11AC of the Central Excise Act, 1944 was sustainable in the facts where duty had been paid, documents recorded the clearance particulars, and the lapse was found to be procedural.

Analysis: The penalty under Section 11AC applies where non-payment of duty is attributable to fraud, collusion, wilful misstatement, suppression of facts, or similar culpable conduct. On the facts recorded, the clearance documents showed the relevant particulars, the department did not dispute the existence of invoices and weighing slips, and the authority had already found no intention to evade duty. The lapse consisted only in not debiting the duty amount before clearance, while the duty itself had been paid. In such circumstances, the case did not attract the ingredients necessary for Section 11AC penalty.

Conclusion: The penalty under Section 11AC was not sustainable and was vacated, in favour of the appellant.

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