Section 11AC penalty requires proven suppression or intent to evade duty; non-disclosure of insurance claim was insufficient.

Penalty under Section 11AC of the Central Excise Act requires proof of fraud, collusion, wilful misstatement, suppression of facts, or similar contravention with intent to evade duty. On the material recorded, the assessee maintained statutory accounts, disclosed receipt and clearance of damaged paper in returns, and paid duty on waste paper cleared as thabha; non-disclosure of the insurance claim was not a statutory reporting requirement and did not by itself establish suppression. The requisite culpable intent was therefore not shown, and the penalty was held unsustainable.

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Issues: Whether penalty under Section 11AC of the Central Excise Act was leviable on the appellant in respect of credit taken on damaged paper and the alleged non-disclosure relating to insurance claims.

Analysis: Penalty under Section 11AC is attracted only where non-levy, short levy, short payment, or erroneous refund results from fraud, collusion, wilful misstatement, suppression of facts, or contravention with intent to evade duty. The material on record showed that the appellant had maintained statutory accounts, disclosed receipt and clearance of the damaged paper in returns, and paid duty on the waste paper cleared as thabha. The non-disclosure of the insurance claim was not a statutory disclosure requirement and, by itself, did not establish suppression of facts. The circumstances also did not support an inference of fraudulent intent or deliberate evasion.

Conclusion: Section 11AC was not attracted and the penalty was unsustainable.

Ratio Decidendi: Penalty under Section 11AC cannot be imposed unless the department proves fraud, wilful misstatement, suppression of facts, or similar culpable conduct with intent to evade duty.

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