Suppression of facts is essential for excise penalty and interest; delayed duty on escalation charges did not justify penal action.

Where duty on escalation charges under turnkey contracts was paid only after final settlement, the absence of suppression of relevant facts prevented invocation of penal and interest consequences. The contract contained an escalation clause, and the authorities were not shown to have been kept unaware of the arrangement; on those facts, non-payment at factory clearance was not treated as suppression. Provisional assessment was identified as the proper course where liability on the escalated value arose later. Accordingly, penalty under Section 11AC and interest under Section 11AB were not sustainable, and the penalty under Rule 209A of the Central Excise Rules, 1944 also could not stand.

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Issues: Whether penalty under Section 11AC and interest under Section 11AB were sustainable in the absence of suppression of relevant facts, and whether the penalty under Rule 209A of the Central Excise Rules, 1944 could survive.

Analysis: The assessee had followed a long-standing practice of paying duty on escalation charges after final settlement under turnkey contracts. The contract itself contained an escalation clause, and the authorities were not shown to have been kept in the dark about the contractual arrangement. On these facts, non-payment at the time of factory clearance was not treated as suppression of facts. The availability of provisional assessment was also noticed as the appropriate course where the duty liability on escalated value would arise later. In the absence of suppression, the ingredients necessary for invoking penal consequences and interest liability were not established.

Conclusion: Penalty under Section 11AC and interest under Section 11AB were not sustainable, and the penalty imposed under Rule 209A of the Central Excise Rules, 1944 also could not stand.

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