Prior notice for penalty enhancement is mandatory; enhancement without notice is without jurisdiction and unsustainable.

An appellate authority cannot enhance a penalty without prior notice to the assessee where the governing provision makes such notice mandatory. The first proviso to Section 35A(3) required notice of the proposed enhancement before any increase could be ordered, and failure to issue such notice rendered the enhancement without jurisdiction. The penalty enhancement made in the Revenue's appeal was therefore unsustainable and the issue was decided in favour of the assessee.

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Issues: Whether the Commissioner (Appeals) could enhance the penalty without issuing notice of the proposed enhancement under Section 35A(3) of the Central Excise Act.

Analysis: The enhancement of penalty was made in an appeal filed by the Revenue, but no notice was given to the assessee informing it of the intention to enhance the penalty. The first proviso to Section 35A(3) made such notice mandatory before any enhancement could be ordered. Since this requirement was not complied with, the appellate authority acted beyond jurisdiction. The cited decisions supported the view that enhancement without notice is unsustainable.

Conclusion: The enhancement of penalty was without jurisdiction and could not be sustained. The issue is decided in favour of the assessee.

Ratio Decidendi: An appellate authority cannot enhance a penalty without prior notice to the assessee where the governing provision makes such notice mandatory; any enhancement made in breach of that requirement is without jurisdiction.

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