Mens rea is essential for penalty under Section 11AC; no fraud or intent to evade means penalty cannot be imposed.

Penalty under Section 11AC of the Central Excise Act, 1944 is not automatic; it requires a finding of fraud, collusion, willful misstatement, suppression of facts, or other contravention with intent to evade duty. Mens rea is therefore a statutory precondition to imposition of the penalty. On the facts noted, duty had been paid and the delay arose from a mistaken belief, with no finding of intent to evade. The penalty was accordingly not exigible and the deletion of penalty was upheld.

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Issues: Whether penalty under Section 11AC of the Central Excise Act, 1944 was mandatory in the absence of fraud, collusion, willful misstatement, suppression of facts, or intent to evade duty.

Analysis: Penalty under Section 11AC is attracted only when non-levy, short levy, non-payment, short payment, or erroneous refund of duty is caused by fraud, collusion, willful misstatement, suppression of facts, or contravention of the Act or Rules with intent to evade duty. The statutory precondition is a finding of culpable intent, and mens rea is therefore essential before penalty can be imposed. On the facts found by the Tribunal, the duty had been paid and the delay was attributable only to a mistaken belief, with no finding of intent to evade payment of duty.

Conclusion: The penalty under Section 11AC was not exigible, and the Tribunal was right in deleting it.

Ratio Decidendi: Penalty under Section 11AC of the Central Excise Act, 1944 cannot be imposed unless the authorities record a finding of fraud, collusion, willful misstatement, suppression of facts, or other contravention with intent to evade duty.

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