Penalty under excise recovery rules requires specific allegation of fraud or intent to evade duty; otherwise it fails.

Penalty under Rule 57-I(4) of the Central Excise Rules, 1944 could not be sustained where the show-cause notice contained no allegation of fraud, wilful misstatement, collusion or suppression of facts with intent to evade duty. The provision authorises penalty only when wrongful credit is taken by reason of such evasive conduct, and in the absence of the necessary allegation and corresponding finding, the penal consequence fails. The reversal of credit was left undisturbed, but the penalty was held inapplicable for want of the required statutory foundation.

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Issues: Whether penalty under Rule 57-I(4) of the Central Excise Rules, 1944 could be imposed when the show-cause notice contained no allegation of fraud, wilful misstatement, collusion or suppression of facts with intent to evade duty.

Analysis: Rule 57-I(4) authorises penalty equal to the wrongly availed credit only where such credit has been taken by reason of fraud, wilful misstatement, collusion or suppression of facts, or similar contravention committed with intent to evade duty. The show-cause notice did not allege any such fraudulent or evasive conduct, and once no such allegation existed there could be no finding to sustain penalty. The legal position was treated as consistent with the earlier view applied in similar excise matters where penalty was held unsustainable in the absence of the requisite allegation and finding.

Conclusion: Penalty was not exigible and the assessee succeeded on this issue.

Final Conclusion: The demand for reversal of credit was not disturbed, but the penalty could not stand for want of the necessary allegation and finding of fraud or intent to evade duty, and the Revenue's appeal failed.

Ratio Decidendi: Penalty under the relevant excise recovery provision cannot be imposed unless the show-cause notice and findings specifically establish fraud, wilful misstatement, collusion, suppression of facts, or intent to evade duty.

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