Penalty under Section 11AC requires suppression or intent to evade; token penalty upheld where differential duty was paid after detection.

Penalty under Section 11AC of the Central Excise Act, 1944 was not attracted where differential duty on conversion of levy sugar into free sale sugar was paid after detection and the record did not establish suppression, misstatement, fraud or intent to evade duty. The proviso to Section 11A had been invoked, but the essential ingredients for equal penalty were absent, so the precedent cited by Revenue was distinguishable. The token penalty sustained by the Commissioner (Appeals) was therefore upheld, and the assessee's appeal succeeded.

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Issues: Whether penalty under Section 11AC of the Central Excise Act, 1944 read with Rule 173Q of the Central Excise Rules, 1944 was warranted when the differential duty was paid after being pointed out, but no suppression of facts or intent to evade duty was established.

Analysis: The demand arose from conversion of levy sugar cleared on loan basis into free sale sugar and the consequent differential duty. Although the proviso to Section 11A of the Central Excise Act, 1944 had been invoked, the record did not disclose suppression of facts, misstatement, fraud, or any intention to evade payment of duty. The differential duty had been paid after detection, and the appellate authority had already found that statutory penalty under Section 11AC was not warranted. The precedent relied upon by Revenue was distinguished on the ground that the essential ingredients for invoking equal penalty were not present on the facts.

Conclusion: Penalty under Section 11AC of the Central Excise Act, 1944 was not mandatory on the facts proved, and the token penalty sustained by the Commissioner (Appeals) was upheld. The appeal was dismissed in favour of the assessee.

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