Penalty restoration needs pleaded proof of fraud or suppression; bare reliance on mandatory wording is insufficient.

Restoration of penalty under Section 11AC of the Central Excise Act and Rule 173Q of the Central Excise Rules requires a pleaded and established basis showing fraud, collusion, wilful misstatement or suppression of facts. A bare assertion that penalty is mandatory, without substantive averments supporting the statutory ingredients, is insufficient to justify enhancement or restoration. Where no appeal is filed against the reduced penalty retained by the lower appellate authority, that part of the order is not open to interference. The penalty sustained below therefore remains undisturbed.

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Issues: Whether the Revenue had made out grounds for restoration of the penalty under Section 11AC of the Central Excise Act, 1944 and the penalty under Rule 173Q(1) of the Central Excise Rules, 1944.

Analysis: The Revenue's appeal did not contain any substantive averment establishing the statutory ingredients for imposition of penalty, namely fraud, collusion, wilful mis-statement or suppression of facts. Merely reproducing the opening portion of Section 11AC and asserting that the penalty was mandatory was insufficient. In the absence of a pleaded and established basis for penalty, the request to restore either the enhanced Section 11AC penalty or the Rule 173Q penalty could not be accepted. The reduced penalty retained by the lower appellate authority was also not open to interference since there was no appeal by the assessee against that part of the order.

Conclusion: The Revenue failed to justify restoration of either penalty, and the penalty as sustained by the lower appellate authority remained undisturbed.

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