Central excise penalty for retained scrap upheld in principle, but reduced after prompt post-visit duty payment.

Penalty under Section 11AC of the Central Excise Act, 1944 was considered justified where scrap sent for machining under Rule 57F(4) was retained by job workers and duty was not paid immediately. Mere entry in RG 23A, Part II was held insufficient to constitute written intimation to the department that the scrap would not be returned to the factory, so liability to penalty was attracted. Prompt payment of duty after the officers' visit was treated as a mitigating circumstance, and the maximum penalty was reduced.

---

---

Issues: Whether penalty under Section 11AC of the Central Excise Act, 1944 was justified for non-receipt of scrap from job workers and whether the quantum of penalty should be reduced.

Analysis: The duty demand was not disputed and was upheld. The record showed that the scrap sent for machining under Rule 57F(4) of the Central Excise Rules, 1944 was retained by the job workers and duty was not paid immediately. Mere entry in RG 23A, Part II did not amount to written intimation to the department that the scrap was not being brought back to the factory. On that basis, liability to penalty was attracted. However, the duty had been paid soon after the officers' visit, which was treated as a relevant mitigating circumstance.

Conclusion: Penalty under Section 11AC was upheld in principle, but the maximum penalty was found unwarranted and was reduced to Rs. 50,000.

---