Penalty under section 11AC sustained where extended-period demand stood and statutory waiver benefit had already been used.

Penalty under section 11AC of the Central Excise Act was examined in the context of differential duty paid before notice and a demand sustained for the extended period. The text states that the assessee's reliance on absence of mala fides and voluntary payment did not displace the basis for invoking the extended period, and that the criteria for sustaining the demand under the proviso to section 11A and imposing penalty under section 11AC were identical on the facts found. It further notes that no separate ground for waiver existed beyond what the statute permitted, and the statutory benefit linked to timely payment of 25% of the penalty had already been availed.

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Issues: Whether penalty under section 11AC of the Central Excise Act, 1944 could be waived when the assessee paid the differential duty before issuance of notice and the demand was confirmed for the extended period.

Analysis: The admitted position was that the differential duty related to freight element in depot transfers and the assessee had already paid the duty and part of the penalty. The Court noted that the grounds urged for waiver of penalty, namely absence of mala fides and voluntary payment, did not displace the basis on which the extended period had been invoked. It held that the criteria for sustaining demand under the proviso to section 11A and for imposition of penalty under section 11AC were identical on the facts found. Once the demand for the extended period was upheld, a different approach could not be adopted only for penalty. The Court further observed that there was no provision for waiver of penalty otherwise than as permitted by law, and the statutory benefit of payment of 25% of penalty within the prescribed time had already been availed.

Conclusion: Penalty under section 11AC was upheld and the appeal failed on the merits of the penalty challenge.

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