Penalty under Section 11AC fails without suppression of facts when duty is paid before the show cause notice.

Penalty under Section 11AC of the Central Excise Act is not sustainable where duty was paid before issuance of the show cause notice and the Revenue failed to show suppression of facts with intent to evade duty. The note concerns scrap cleared under challans under Rule 57F of the erstwhile Central Excise Rules, 1944, in a context where liability on scrap generated at the job worker's premises was disputed. In the absence of evidence satisfying the statutory requirement for penalty, the penal consequence cannot be imposed and the assessee is entitled to deletion of penalty.

---

---

Issues: Whether penalty under Section 11AC of the Central Excise Act, 1944 was sustainable where duty had been paid before issue of show cause notice and no material was shown to establish suppression of facts with intent to evade duty.

Analysis: The goods were cleared under challans under Rule 57F of the erstwhile Central Excise Rules, 1944 and there was confusion regarding liability to pay duty on scrap generated at the job worker's premises. The duty had already been deposited before issuance of the show cause notice. In the absence of material from the Revenue showing suppression of facts with intent to evade payment, the statutory requirement for imposition of penalty was not met.

Conclusion: The penalty under Section 11AC was not sustainable and was set aside.

Final Conclusion: The duty demand was not contested, but the penal consequence was deleted, resulting in only partial relief to the assessee.

Ratio Decidendi: Penalty under Section 11AC cannot be sustained in the absence of suppression of facts with intent to evade duty, particularly where duty has been paid before issuance of the show cause notice.

---