Bona fide valuation dispute defeats penalty under section 11AC, while duty and interest remain payable.

Penalty under section 11AC of the Central Excise Act was held unsustainable where the assessee adopted valuation under section 4A on the basis of then-prevailing Tribunal decisions and claimed a bona fide belief. The record showed confusion over the applicable valuation method, and the conduct did not establish deliberate intention to evade duty, which is necessary for imposition of penalty. The penalty was therefore set aside, while the duty demand and interest remained undisturbed.

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Issues: Whether penalty under section 11AC of the Central Excise Act, 1944 was sustainable when the assessee had adopted valuation on the basis of section 4A relying on then-prevailing Tribunal decisions and claimed bona fide belief.

Analysis: The appeal challenged only the penalty. The assessee had cleared the goods on the basis of valuation under section 4A, supported at the relevant time by Tribunal decisions on MRP-based valuation, and the record showed confusion on the applicable valuation method. On these facts, the conduct did not disclose deliberate intention to evade duty, which is necessary for imposition of penalty under section 11AC.

Conclusion: Penalty under section 11AC was not warranted and was set aside, while the duty demand and interest were left undisturbed.

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