Bona fide SSI exemption claim rejected where brand-name use and prior knowledge supported penalty under excise law.

Penalty under the Central Excise framework was found sustainable where the assessee knowingly claimed SSI exemption despite using another person's brand name and continuing the claim until departmental verification. The un-retracted statement of the Director, the royalty arrangement, and the absence of evidence for the carry-bag explanation supported the finding that the claim was not bona fide. Payment of duty before the show cause notice, without interest, did not remove the basis for penalty. On the established contravention, the statutory penalty under Section 11AC was held to apply once the conditions for its invocation were met.

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Issues: Whether penalty under Section 11AC of the Central Excise Act, 1944 was attracted on the facts of the case, including whether the appellants had acted bona fide in claiming SSI exemption and whether payment of duty before the show cause notice precluded penalty.

Analysis: The inquiry was confined to the grounds taken in the memo of appeal. The record showed that the appellants did not dispute the duty demand or the inapplicability of the SSI exemption, and they also did not challenge the basis for invocation of the extended period. The Director's un-retracted statement showed knowledge that the goods carried another person's brand name and that royalty was being paid for such use, yet the appellants continued to claim exemption until the department visited the factory. The alleged plea that the brand name appeared only on carry-bags was not supported by evidence and was not raised as a ground in the memo of appeal. Mere payment of duty, without interest, after departmental visit did not negate the absence of bona fides. In view of the established contravention and the binding law that penalty under Section 11AC is equal to the duty involved once the statutory conditions are met, the cited decisions offered no assistance to the appellants.

Conclusion: Penalty under Section 11AC was rightly imposed, and the challenge to the penalty failed.

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