Assessable value must include free denaturant; Section 11AC applies prospectively, leaving no substantial question of law.

Assessable value of denatured spirit had to include the value of denaturant supplied free by buyers; omission of that value made the duty short-paid, so proceedings under Section 11A of the Central Excise Act, 1944 were properly initiated. Section 11AC applied only from 28 September 1996 under Section 76 of the Finance (No. 2) Act, 1996, so it could not be extended to any prior period. On that basis, the Tribunal's order sustaining the duty demand and remitting penalty for redetermination did not raise any substantial question of law, and the challenge to the penalty order failed.

---

---

Issues: Whether penalty under Section 11AC of the Central Excise Act, 1944 could be applied only prospectively from 28 September 1996, and whether the Tribunal's order sustaining the duty demand and remitting the penalty for redetermination disclosed any substantial question of law.

Analysis: The assessable value of denatured spirit had to include the value of the denaturant supplied free of cost by the buyers. The omission to include that value in the returns meant that the duty was short-paid, and proceedings under Section 11A of the Central Excise Act, 1944 were properly initiated. The Court also noted that Section 11AC of the Central Excise Act, 1944 came into force only with effect from 28 September 1996 by virtue of Section 76 of the Finance (No. 2) Act, 1996, and therefore its application could not extend to the prior period. In the circumstances, the Tribunal's approach in upholding liability and directing redetermination of penalty did not present any substantial question of law.

Conclusion: The challenge to the penalty order failed. The Court upheld the revenue's action and refused interference.

---