Penalty and interest under Central Excise law require proof of intent to evade duty, not mere short-payment.

Penalty under Section 11AC of the Central Excise Act applies only where short-payment is attributable to fraud, collusion, wilful misstatement, suppression of facts, or similar conduct with intent to evade duty. Where the assessee has paid the differential duty before confirmation of the show cause notice and the record does not establish any such culpable intent, the statutory conditions for penalty are not met. For the same reason, interest under Section 11AB is also not attracted on those facts. The commentary notes that the tribunal's view, declining both penalty and interest, accords with the statutory framework and the evidentiary record.

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Issues: Whether penalty and interest under Sections 11AC and 11AB of the Central Excise Act, 1944 were leviable where the assessee had paid the differential duty before the show cause notice was confirmed and the record did not establish fraud, collusion, wilful misstatement, suppression of facts, or intent to evade duty.

Analysis: Section 11AC applies only where short-levy or short-payment of duty is attributable to fraud, collusion, wilful misstatement, suppression of facts, or contravention of the Act or rules with intent to evade payment of duty. The essential requirement is proof of intent to evade. On the facts, the assessee had already paid the differential duty before confirmation of the demand. In that situation, the statutory conditions for invoking Section 11AC were not satisfied. For the same reason, Section 11AB was also not attracted. The Tribunal's view that no penalty or interest could be sustained was consistent with the legal framework and the factual record.

Conclusion: Penalty and interest under Sections 11AC and 11AB were not leviable, and the appeal by the Revenue failed.

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