Mandatory excise penalty not attracted where duty and interest were paid before notice and no suppression was shown.

Mandatory penalty under Section 11AC of the Central Excise Act was not attracted because the differential duty and interest were paid before the show-cause notice and the clearances were already reflected in statutory records. In the absence of suppression, misstatement, or clandestine conduct with intent to evade duty, the statutory ingredients for imposing the penalty were not established. No penalty was therefore leviable.

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Issues: Whether penalty under Section 11AC of the Central Excise Act, 1944 was invocable when the differential duty and interest had been paid before issuance of the show-cause notice and the records disclosed no suppression, misstatement, or clandestine conduct with intent to evade duty.

Analysis: Section 11AC applies only where the conditions for invoking the penal provision are satisfied. The payment of differential duty and interest before the show-cause notice, together with the fact that clearances were reflected in statutory records, indicated absence of suppression, misstatement, or clandestine activity. In those circumstances, the prerequisite for imposing mandatory penalty was not established.

Conclusion: Section 11AC was not invocable, and no penalty was leviable.

Final Conclusion: The appeal failed because the penalty set aside by the lower appellate authority was not justified for want of the statutory ingredients for invoking mandatory penalty.

Ratio Decidendi: Mandatory penalty under Section 11AC cannot be imposed unless the ingredients of suppression, misstatement, or intent to evade duty are established; where duty and interest are paid before notice and the conduct is disclosed in statutory records, the provision is not attracted.

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