Central excise penalty fails where non-payment stems from bona fide belief and no wilful suppression or mens rea is shown.

Penalty under central excise penal provisions is not warranted where the assessee's non-payment of duty arose from a bona fide belief that duty was not payable and there is no wilful suppression of facts or mens rea. The unchallenged finding of no wilful suppression was decisive, and the prior settlement of the duty dispute reinforced the absence of deliberate evasion. In those circumstances, the penalty could not be sustained and the revenue challenge to its deletion failed.

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Issues: Whether penalty under Rule 173Q of the Central Excise Rules, 1944 read with Section 11AC of the Central Excise Act, 1944 was sustainable in the absence of wilful suppression of facts and in view of the assessee's bona fide belief.

Analysis: The finding that there was no wilful suppression of facts was not challenged. The dispute over liability to duty had earlier been settled by the Supreme Court, and the assessee's non-payment was accepted as having arisen from a bona fide belief that duty was not payable. In such circumstances, and in the absence of mens rea, penalty was held to be unwarranted.

Conclusion: Penalty was not leviable, and the Revenue's challenge to the setting aside of penalty failed.

Ratio Decidendi: Penalty under the central excise penal provisions is not justified where there is no wilful suppression or mens rea and the non-payment of duty stems from a bona fide belief.

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