Intent to evade duty must be specifically pleaded before penalty under Section 11AC can be imposed or enhanced.

Penalty under Section 11AC of the Central Excise Act cannot be imposed or enhanced unless the show-cause notice specifically alleges that the breach was committed with intent to evade payment of duty. Where the notice refers only to violation of the Cenvat Credit Rules, 2002 and omits the statutory allegation of intent to evade, the higher penalty is not sustainable. On that footing, the reduced penalty was upheld and the original higher penalty was not restored.

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Issues: Whether penalty under Section 11AC of the Central Excise Act could be sustained or enhanced when the show-cause notice alleged only breach of the Cenvat Credit Rules, 2002 and did not allege intent to evade payment of duty.

Analysis: The notice proposed penalty under Rule 13(2) of the Cenvat Credit Rules, 2002 read with Section 11AC of the Central Excise Act for violation of the Cenvat Credit Rules, but it did not specifically allege that the breach was committed with intent to evade duty. Section 11AC penalty requires the statutory ingredient of intent to evade payment of duty. In the absence of such an allegation in the notice, the original authority could not justify the higher penalty under Section 11AC, and the appellate authority was justified in reducing the quantum.

Conclusion: Penalty under Section 11AC could not be restored to the original amount and the reduction was sustained.

Final Conclusion: The Revenue failed to establish the necessary foundation for the penal demand under Section 11AC, and the reduced penalty order remained undisturbed.

Ratio Decidendi: A penalty under Section 11AC of the Central Excise Act cannot be imposed or enhanced unless the show-cause notice specifically alleges breach with intent to evade payment of duty.

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