Mens rea and proof of clandestine removal are essential before imposing central excise penalty under Section 11AC.

Penalty under central excise law is said to require proof of the statutory ingredients, including mens rea, before Section 11AC can apply. The text notes that the shortage was detected only during stock verification and that no material showed clandestine removal or clearance of goods. On that basis, it records that the record did not establish the elements necessary to sustain the penalty, and the Revenue's challenge to the reduction of penalty failed.

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Issues: Whether penalty was sustainable in the absence of material showing clandestine removal and mens rea for invoking penalty under the central excise law.

Analysis: The shortage was detected only during stock verification. No material was found to show clandestine clearance of goods. Penalty under Section 11AC of the Central Excise Act, 1944 requires the statutory ingredients to be satisfied, including mens rea, and the record did not disclose such elements in the present case.

Conclusion: The penalty was not interfered with and the Revenue's challenge to the reduction of penalty failed.

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