Penalty notices are not vitiated by a wrong provision reference where jurisdiction exists and no prejudice is shown.

A penalty under the compounded levy scheme was not invalidated merely because the show cause notice referred to Section 11AC while the penalty was imposed under Rule 96ZP(1), since no prejudice was shown and the competent authority had jurisdiction to invoke the penal provision. The claimed benefit of reduced penalty under the proviso to Section 11AC was unavailable because that proviso operated only from 12-5-2000 and could not apply retrospectively. The factual finding that the production-capacity parameter had changed without proper intimation, despite a later plea of normal wear and tear, sustained the conclusion of deliberate non-disclosure and the penalty.

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Issues: (i) Whether penalty could be sustained where the show cause notice referred to Section 11AC of the Central Excise Act, 1944 but the penalty was ultimately imposed under Rule 96ZP(1) of the Central Excise Rules, 1944. (ii) Whether the appellant was entitled to the benefit of reduced penalty under the proviso to Section 11AC of the Central Excise Act, 1944 and to avoid penalty on the plea that the variation in the production-capacity parameter was due to normal wear and tear.

Issue (i): Whether penalty could be sustained where the show cause notice referred to Section 11AC of the Central Excise Act, 1944 but the penalty was ultimately imposed under Rule 96ZP(1) of the Central Excise Rules, 1944.

Analysis: A mere wrong of the provision in the notice or order does not by itself invalidate the proceedings. What is material is whether the competent authority issued notice and whether the statutory preconditions for invoking the penal provision were satisfied. No prejudice was shown from the reference to Section 11AC in the notice, and the penalty was in fact imposed under the rule applicable to the compounded levy scheme.

Conclusion: The penalty was not vitiated on account of the reference to Section 11AC in the show cause notice and the issue was decided against the assessee.

Issue (ii): Whether the appellant was entitled to the benefit of reduced penalty under the proviso to Section 11AC of the Central Excise Act, 1944 and to avoid penalty on the plea that the variation in the production-capacity parameter was due to normal wear and tear.

Analysis: The proviso enabling discharge on payment of a reduced penalty was introduced only with effect from 12-5-2000 and, therefore, could not be applied to the relevant period. On facts, the Tribunal found that the declared production-capacity parameter had changed, that the appellant had not intimated the change as required, and that the later plea of mere wear and tear did not displace the finding of deliberate non-disclosure. The finding of mens rea and the legality of the penalty were thus sustained.

Conclusion: The appellant was not entitled to reduced penalty, and the penalty was upheld against the assessee.

Final Conclusion: The challenge to the penalty failed in its entirety and the order sustaining the duty-related penalty under the compounded levy scheme was maintained.

Ratio Decidendi: A penalty order is not invalid merely because the show cause notice mentions a wrong provision, provided the competent authority has jurisdiction and the statutory conditions for penalty are met; a later-inserted beneficial proviso cannot be applied retrospectively to an earlier period.

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