Section 11AC penalty requires specific allegations of fraud or suppression; absence of such allegations defeated the levy.

Penalty under Section 11AC of the Central Excise Act, 1944 could not be sustained because the show cause notice did not allege fraud, misstatement, suppression of facts, contravention of rules, or intent to evade duty. The shortage of raw material had also been made good by reversal of credit before issuance of the notice. In the absence of these foundational allegations, the statutory requirements for invoking penal liability under Section 11AC were not met, and the penalty was set aside in favour of the assessee.

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Issues: Whether penalty under Section 11AC of the Central Excise Act, 1944 was sustainable when the show cause notice did not allege fraud, misstatement, suppression of facts, contravention of rules, or intent to evade duty.

Analysis: The shortage of raw material had been made good by reversal of credit before issuance of the show cause notice, and the notice itself contained no allegation of fraud, misstatement, suppression, or deliberate contravention with intent to evade duty. In the absence of such foundational allegations, the statutory conditions for invoking Section 11AC were not satisfied.

Conclusion: The penalty under Section 11AC of the Central Excise Act, 1944 was not sustainable and was set aside in favour of the assessee.

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