Suppression and intent to evade duty trigger mandatory penalty under Section 11AC, with no general discretion to reduce it

Suppression of facts and intent to evade duty satisfied the ingredients for penalty under Section 11AC of the Central Excise Act, because the same conduct had already justified the extended limitation period. The Tribunal held that, once these statutory conditions were met, penalty equal to the duty determined followed, and a lesser penalty could be imposed only within the proviso's reduced-penalty mechanism. As the conditions for that concession were not satisfied, the reduced penalty could not stand and the penalty equal to the duty demand was restored.

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Issues: (i) Whether penalty under Section 11AC of the Central Excise Act, 1944 was warranted on the established facts of suppression and intent to evade duty. (ii) Whether, once penalty was warranted, the Tribunal had discretion to reduce the penalty below the duty amount, save as permitted by the statutory proviso.

Issue (i): Whether penalty under Section 11AC of the Central Excise Act, 1944 was warranted on the established facts of suppression and intent to evade duty.

Analysis: The finding that the assessee deliberately failed to include the value of bushes in the assessable value of pulsators had already attained finality. The same facts which justified invocation of the extended period under Section 11A(1) also satisfied the ingredients for penalty under Section 11AC, namely fraud, suppression of facts, or similar contravention with intent to evade duty. The record showed deliberate non-disclosure to the department and an attempt to short-pay duty, so the statutory conditions for penalty were met.

Conclusion: Penalty under Section 11AC was warranted.

Issue (ii): Whether, once penalty was warranted, the Tribunal had discretion to reduce the penalty below the duty amount, save as permitted by the statutory proviso.

Analysis: Section 11AC, as applied to the relevant period, fixed penalty at an amount equal to the duty determined, with reduced penalty available only where the statutory conditions in the proviso were satisfied. The provision did not confer a general discretion to impose a lesser penalty. Since the conditions for the special reduced-penalty benefit were not met, the earlier reduced penalty could not stand.

Conclusion: The Tribunal had no discretion to reduce the penalty below the duty amount apart from the statutory reduced-penalty mechanism.

Final Conclusion: The order reducing penalty was set aside and the adjudicating authority's penalty equal to the duty demand was restored.

Ratio Decidendi: Where the ingredients for invocation of the extended period under Section 11A(1) are established on account of suppression or intent to evade duty, penalty under Section 11AC is attracted, and the adjudicating authority has no discretion to impose a lesser penalty except to the extent specifically permitted by the proviso.

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