Section 11AC penalty requires fraud or suppression; without those ingredients, mandatory penalty cannot be imposed.

Mandatory penalty under section 11AC of the Central Excise Act, 1944 applies only where fraud, collusion, wilful mis-statement, suppression of facts, or contravention with intent to evade duty is alleged and proved. In the absence of those statutory ingredients, the precondition for invoking section 11AC was not satisfied, so penalty could not be imposed merely because duty and interest had been paid. Section 11AC was therefore held inapplicable and the penalty was not imposable.

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Issues: Whether mandatory penalty under section 11AC of the Central Excise Act, 1944 was attracted in the absence of allegations of fraud, collusion, wilful mis-statement, suppression of facts, or contravention with intent to evade duty.

Analysis: Mandatory penalty under section 11AC arises only when the statutory ingredients are satisfied. The absence of any allegation of fraud, collusion, wilful mis-statement, suppression of facts, or deliberate contravention to evade duty meant that the precondition for invoking section 11AC was not met. In such circumstances, penalty could not be imposed merely because duty and interest had been paid or because penalty was otherwise sought.

Conclusion: Section 11AC was not attracted and the penalty was not imposable. The appeal was therefore rejected.

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