Penalty and substantial question of law fail where fraud or misappropriation is not found on the facts.

Penalty was not exigible where neither the adjudicating authority nor the Tribunal had found fraud or misappropriation under Section 11A of the Central Excise Act, 1944. The High Court noted that the existence of fraud or misappropriation depends on proof of factual ingredients, so their absence on the record did not raise a substantial question of law. On that basis, the appeal was held not maintainable.

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Issues: Whether any substantial question of law arose from the Tribunal's order sustaining the view that penalty was not exigible in the absence of a finding of fraud or misappropriation.

Analysis: The order recorded that neither the adjudicating authority nor the Tribunal had found that the respondent had committed fraud or misappropriation within the meaning of Section 11A of the Central Excise Act, 1944. In the absence of such a factual finding, the questions whether fraud or misappropriation existed could not be treated as giving rise to a question of law, since those matters depend on proof of factual ingredients.

Conclusion: No substantial question of law arose, and the appeal was not maintainable on that basis.

Ratio Decidendi: Where the existence of fraud or misappropriation has not been found on facts, no substantial question of law arises merely because a penalty issue is sought to be framed on that basis.

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