Voluntary disclosure defeats penalty under Section 11AC where suppression or wilful misstatement with intent to evade duty is absent.

Penalty under Section 11AC of the Central Excise Act, 1944 requires suppression of facts, wilful misstatement, or similar culpable conduct with intent to evade duty. Where the assessee files declarations, discloses the revised duty position to the department, and pays the differential duty before adjudication, those ingredients are not established. On that basis, the article states that penalty is not leviable and the related interest consequence linked to such culpable conduct is also not attracted.

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Issues: Whether penalty under Section 11AC of the Central Excise Act, 1944 and interest under Section 11AB of the Central Excise Act, 1944 were leviable when the assessee had filed declarations, informed the department of the revised position, and later paid the differential duty before adjudication.

Analysis: The assessee had filed declarations under Rule 173B of the Central Excise Rules, 1944 and had also communicated the revised duty position to the department on its own. The record showed that the change in classification and the proposal to pay differential duty were disclosed before the departmental action culminated in adjudication. On these facts, the ingredients required for penalty under Section 11AC, namely suppression of facts or wilful misstatement with intent to evade duty, were not established. For the same reason, the basis for invoking interest linked to such culpable conduct was also absent.

Conclusion: Penalty under Section 11AC was not leviable and the assessee succeeded on the substantial issue.

Final Conclusion: The duty dispute did not justify penal consequences in the absence of suppression or wilful misstatement, and the assessee's appeal was allowed.

Ratio Decidendi: Penalty under Section 11AC cannot be sustained unless the department establishes suppression, wilful misstatement, or similar culpable conduct with intent to evade duty, and voluntary disclosure negates such ingredients.

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