Non-retrospectivity of penalty under Section 11AC barred its application to earlier conduct and the levy was set aside.

Penalty under Section 11AC of the Central Excise Act could not be imposed for a period preceding its insertion, because a penalty provision cannot operate retrospectively. The relevant period was 1992-93, while Section 11AC came into force only in September 1996. As the earlier penalty under Section 173Q had already been dropped and the impugned penalty was founded only on Section 11AC, the penalty was held unsustainable and set aside in favour of the assessee.

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Issues: Whether penalty under Section 11AC of the Central Excise Act could be sustained for a period prior to its insertion in the statute.

Analysis: The relevant period was 1992-93, while Section 11AC came into force only in September 1996. A penalty provision cannot be applied to an alleged illegality committed before the provision was inserted. The earlier penalty under Section 173Q had been dropped, and the penalty had been imposed only under Section 11AC. In view of the settled position that the provision is not retrospective, the penalty imposed under Section 11AC was not sustainable.

Conclusion: The penalty under Section 11AC could not be imposed for the period in question and was set aside, in favour of the assessee.

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