Prospective penalty under Section 11AC cannot cover earlier periods, while token Rule 173Q penalty was maintained.

Penalty under Section 11AC of the Central Excises & Salt Act, 1944 could not be sustained for a demand period substantially predating its insertion, because the provision came into force only from 28-9-1996 while the relevant period ran from 1-4-1993 to 31-12-1996; the penalty was therefore set aside. The token penalty imposed under Rule 173Q of the Central Excise Rules was not shown to call for interference and was maintained.

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Issues: Whether the penalty imposed under Section 11AC of the Central Excises & Salt Act, 1944 was sustainable for a period substantially predating its introduction, and whether the token penalty under Rule 173Q of the Central Excise Rules required interference.

Analysis: The relevant period ran from 1-4-1993 to 31-12-1996, while Section 11AC was introduced only with effect from 28-9-1996. As the major part of the demand period fell before the statutory provision came into force, the penalty could not be sustained for the entire period. At the same time, no ground was made out to disturb the token penalty imposed under Rule 173Q of the Central Excise Rules.

Conclusion: The penalty under Section 11AC of the Central Excises & Salt Act, 1944 was set aside, but the token penalty under Rule 173Q was maintained.

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