Penalty under excise law requires proved suppression or mis-declaration; open credit claim and prompt payment defeated penalty.

Penalty under Section 11AC of the Central Excise Act, 1944 read with Rule 13 of the CENVAT Credit Rules, 2002 was unsustainable because suppression of facts or mis-declaration was not established by cogent material. The credit claim had been made openly on the basis that gas cylinders were capital goods, and in remand proceedings the major part of the demand was reduced after accepting that the goods were admissible as inputs. The records disclosed no substantial evidence of contumacious intent, and prompt payment of the reduced amount within one month of the show cause notice further supported the absence of penalty jurisdiction. The penalty was set aside.

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Issues: Whether penalty under Section 11AC of the Central Excise Act, 1944 read with Rule 13 of the CENVAT Credit Rules, 2002 was sustainable in the absence of a finding of suppression of facts or mis-declaration, when the credit dispute arose from the assessee's classification of gas cylinders as capital goods and the demand was substantially reduced in de novo proceedings.

Analysis: The claim for Cenvat credit had originally been made openly on the basis that the cylinders were capital goods, and in the remand proceedings the major portion of the demand was dropped after accepting the assessee's plea that the goods were admissible as inputs. On the records, there was no supporting reasoning or substantial evidence showing suppression of facts or mis-declaration so as to attract the penal provision under Section 11AC. The payment of the reduced amount within one month of the show cause notice further supported the absence of a contumacious intent.

Conclusion: The penalty was not sustainable and was rightly set aside.

Final Conclusion: The appeal succeeded only on the penalty issue, and the order confirming penalty was set aside.

Ratio Decidendi: Penalty under Section 11AC of the Central Excise Act, 1944 cannot be imposed unless suppression of facts or mis-declaration is established by cogent material.

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