Intent to evade duty is essential for section 11AC penalty; explained stock shortage and prior payment defeated penalty.

Penalty under section 11AC of the Central Excise Act is attracted only where there is intent to evade duty. The stock shortage was explained as a clerical mistake, the duty was deposited before the show-cause notice without protest, and there was no material to show clandestine removal. On those findings, the legal basis for penalty was absent and section 11AC was not leviable.

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Issues: Whether penalty under section 11AC of the Central Excise Act, 1944 could be imposed in the absence of intention to evade payment of excise duty and where the shortage found on stock verification was explained as a clerical mistake.

Analysis: Section 11AC is attracted only when there is an intention to evade duty. The Tribunal had recorded findings that the shortage detected during stock verification stood explained, that the duty had been deposited without protest before issuance of the show-cause notice, and that there was no material to support clandestine removal of goods. These findings of fact negatived the basis for invoking the penalty provision.

Conclusion: Penalty under section 11AC was not leviable.

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