Prospective operation of penal provisions limits excise penalty, while voluntary payment does not erase liability for established duty evasion.

Penalty for duty evasion under Section 11AC was treated as dependent on established concealment and non-disclosure of the escalation clause, escalated bills, and receipt of the higher price; voluntary payment after objection did not remove the liability to penalty. The penal provision, however, was held to operate only from 28-9-1996 and could not be applied retrospectively to any earlier period. Accordingly, penalty was confined to the duty short-paid after commencement of Section 11AC, not to the entire earlier period of short payment.

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Issues: (i) Whether penalty under Section 11AC of the Central Excise Act, 1944 could be imposed for the entire duty short-paid when part of the duty had been voluntarily paid before the adjudication order. (ii) Whether penalty under Section 11AC of the Central Excise Act, 1944 could be applied retrospectively for the period prior to its insertion on 28-9-1996.

Issue (i): Whether penalty under Section 11AC of the Central Excise Act, 1944 could be imposed for the entire duty short-paid when part of the duty had been voluntarily paid before the adjudication order.

Analysis: The findings of concealment and non-disclosure of the escalation clause, the escalated bills, and receipt of the escalated price established evasion of duty. The voluntary payment made after the objection was pointed out did not negate liability to penalty, which followed from the established intention to evade duty.

Conclusion: Penalty under Section 11AC was leviable, but not on the whole amount of duty short-paid for the entire period.

Issue (ii): Whether penalty under Section 11AC of the Central Excise Act, 1944 could be applied retrospectively for the period prior to its insertion on 28-9-1996.

Analysis: Section 11AC became operative only from 28-9-1996 by virtue of Section 76 of the Finance (2) Act, 1996. The penal provision could not operate for a period before its insertion, so liability under that section was confined to the period after its commencement.

Conclusion: Penalty under Section 11AC could be imposed only for the duty short-paid from 28-9-1996 to 31-8-1998.

Final Conclusion: The penalty was sustained only to the extent permitted by the effective date of the penal provision, resulting in a partial success for both sides but overall partial allowance of the appeal.

Ratio Decidendi: A penal provision cannot be applied for any period prior to its statutory commencement, even where liability for duty evasion is otherwise established.

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