Penalty under Section 11AC failed where stock shortage was found but no clandestine removal was proved; duty demand stood.

Shortage detected during stock verification did not, on these facts, justify penalty under Section 11AC of the Central Excise Act, 1944 because the goods had been cleared under excise invoices, the duty had already been paid, and no material established clandestine removal. The absence of evidence of suppression or illicit clearance meant the penal provision could not be invoked. The duty demand itself remained valid and was upheld.

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Issues: Whether penalty under Section 11AC of the Central Excise Act, 1944 was sustainable when shortage was detected on stock verification and the duty had already been paid, and no material showed clandestine removal.

Analysis: The shortage was noticed during stock verification. The goods bearing another person's brand name had been cleared under excise invoices, and the duty demand had already been deposited. On the facts, no material was found to establish clandestine removal of goods. In such circumstances, invocation of penalty under Section 11AC was not justified, although the duty demand itself remained valid.

Conclusion: Penalty under Section 11AC of the Central Excise Act, 1944 was not sustainable and was set aside, while the duty demand was upheld.

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