Section 11AC penalty requires wilful suppression or intent to evade duty; absence of such finding defeats penalty.

Penalty under Section 11AC of the Central Excise Act is attracted only where non-payment, short-payment or erroneous refund is accompanied by wilful suppression, misstatement or contravention with intent to evade duty. Mere payment of duty and interest before notice does not by itself bar penalty, but the requisite mens rea must still be clearly found. As the notice and adjudication record contained no clear finding of wilful intent to evade duty, the penalty orders could not be sustained. Penalty under Section 11AC was therefore held not leviable on the facts found.

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Issues: Whether penalty under Section 11AC of the Central Excise Act, 1944 was sustainable in the absence of a finding of wilful suppression of facts or intent to evade duty.

Analysis: Penalty under Section 11AC is attracted only when the statutory conditions are satisfied, namely, non-payment, short-payment or erroneous refund of duty accompanied by wilful suppression, misstatement or contravention with intent to evade duty. Mere payment of duty and interest before issue of notice does not by itself preclude penalty, but the existence of the requisite mens rea must still be established. On the record, the notice and adjudication did not contain a clear finding that the assessee had acted wilfully with intent to evade duty. In these circumstances, the earlier orders confirming or reducing penalty could not be sustained.

Conclusion: Penalty under Section 11AC was not leviable on the facts found, and the assessee succeeded.

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