Section 11AC penalty requires fraud or suppression; admitted shortage and prompt duty payment were not enough.

Mandatory penalty equal to duty under Section 11AC of the Central Excise Act applies only where the duty demand is supported by findings of fraud, collusion, wilful misstatement or suppression of facts. On the stated facts, those ingredients were neither alleged in the show cause notice nor recorded in the order-in-original, and the admitted shortage with prompt payment of duty was insufficient by itself to attract the provision. The commentary notes that the reduced penalty was therefore left undisturbed and the appeal was rejected.

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Issues: Whether penalty equal to duty under Section 11AC of the Central Excise Act was sustainable in the absence of fraud, collusion, willful misstatement or suppression of facts.

Analysis: Section 11AC applies only where the duty demand is founded on fraud, collusion, willful misstatement or suppression of facts. The record did not disclose that such ingredients were alleged in the show cause notice or found in the order in original. The shortage was admitted and duty was paid the next day, and that circumstance by itself was insufficient to justify mandatory penalty equal to duty. The view taken by the Commissioner (Appeals) that Section 11AC could not be invoked on the facts had merit.

Conclusion: Penalty under Section 11AC was not exigible, and the reduced penalty was not interfered with. The appeal was rejected.

Ratio Decidendi: Penalty equal to duty under Section 11AC cannot be sustained unless the demand is supported by findings of fraud, collusion, willful misstatement, or suppression of facts.

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