Section 11AC penalty requires proven evasion; procedural PLA debit lapse alone cannot justify penalty on the full quantity.

Penalty under Section 11AC of the Central Excise Act was not sustainable on the alleged 242 bags of yarn because the only default was non-debiting in the PLA, treated as a procedural lapse without established evasion or non-levy. The penalty could therefore not extend to the full duty relatable to that quantity. In contrast, clandestine removal was established only for the seized 8 bags, so a duty-linked penalty was maintainable for that limited extent, though it need not equal the duty amount. The penalty was accordingly restricted to Rs. 5,000 for the proved liability on the seized goods.

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Issues: Whether penalty under Section 11AC of the Central Excise Act was leviable at the full amount on the footing that duty had not been debited in PLA in respect of 242 bags of yarn, and whether the penalty should be confined to the duty involved in the seized 8 bags only.

Analysis: The goods seized from the jeep represented clandestine removal only to the extent of 8 bags, carrying a duty liability of Rs. 7,982/-. As regards the alleged 242 bags, the documents had been prepared and the only default was non-debiting in the PLA, which was treated as a procedural lapse. For such a lapse, the appropriate provision was the rule relating to register entries, and the penalty provisions under Section 11AC were not attracted in the absence of established evasion or non-levy for that larger quantity. The penalty therefore could not be sustained on the entire duty amount relatable to 242 bags. At the same time, the duty-linked penalty on the seized 8 bags was maintainable, though not necessarily equal to the duty amount.

Conclusion: Penalty under Section 11AC was not sustainable on the full quantum relating to 242 bags and was restricted to Rs. 5,000/- in respect of the established duty liability on the seized 8 bags.

Ratio Decidendi: A penalty for short levy or non-levy under Section 11AC cannot be sustained for a mere procedural lapse in debit entries where evasion is not established for the larger quantity, and even where penalty is attracted, it need not be equal to the duty amount.

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