Section 11AC penalty requires intent to evade duty; mistaken belief and full payment defeated penalty liability.

Penalty under Section 11AC of the Central Excise Act is attracted only where non-levy, short levy, or short payment of duty arises from fraud, collusion, wilful misstatement, suppression of facts, or other contravention with intent to evade duty. A finding of mens rea is therefore a condition precedent. On the facts noted, the delay in payment stemmed from a mistaken belief about clearance for testing, and full duty had been paid at the time of removal. Penalty was therefore not leviable, and deletion of the penalty was upheld.

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Issues: Whether penalty under Section 11AC of the Central Excise Act, 1944 was leviable 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, or short payment of duty results from fraud, collusion, willful misstatement, suppression of facts, or contravention of the Act or Rules with intent to evade payment of duty. A finding of mens rea or guilty mind is therefore a condition precedent. On the facts found, the delay in payment arose from a mistaken belief regarding clearance for testing, and the full duty had been paid at the time of removal. The necessary element of intent to evade duty was absent.

Conclusion: Penalty under Section 11AC was not leviable and the deletion of penalty was upheld.

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