Mandatory excise penalty under Section 11AC was unwarranted where no fraud, suppression, or intent to evade duty was shown.

Penalty under Section 11AC of the Central Excise Act was not mandatory on these facts because the goods were cleared after reprocessing under the prescribed procedure, the packing mistake arose from a shift change and use of similar boxes, and the transactions were properly recorded in the books. The elements required for equivalent penalty-fraud, collusion, suppression of facts, wilful misstatement, or contravention with intent to evade duty-were not established. The appellate authority was therefore justified in reducing the penalty, and the departmental challenge failed.

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Issues: Whether the penalty under Section 11AC of the Central Excise Act, 1944 was required to be imposed at the equivalent amount in the facts of the case, and whether the reduction of penalty by the appellate authority was justified.

Analysis: The goods were cleared after reprocessing under the prescribed procedure, and the mistake occurred in the packing section due to a shift change and use of similar boxes. The transactions were duly recorded in the books of account. On these facts, the elements necessary for mandatory penalty under Section 11AC, namely fraud, collusion, suppression of facts, wilful misstatement, or contravention with intent to evade duty, were not made out. In such circumstances, equivalent penalty was not obligatory, and the appellate authority was justified in reducing the penalty.

Conclusion: The reduction of penalty was upheld, and the departmental challenge failed.

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