Penalty under Section 11AC requires fraud or intent to evade; delayed duty payment alone is insufficient.

Penalty under Section 11AC of the Central Excise Act was held unsustainable where duty was paid before the show-cause notice, the liability had been reflected in returns, and the record showed no fraud, collusion, wilful misstatement, suppression of facts, or intent to evade duty. The discussion notes that Rule 8(3A) of the Central Excise Rules governed the consequences of delayed payment and restriction on Cenvat credit utilisation, but did not by itself create automatic penalty exposure under Section 11AC. Penalty is attracted only when the statutory ingredients for such action are established.

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Issues: Whether penalty under Section 11AC of the Central Excise Act, 1944 was sustainable for delayed payment of duty where the assessee had reflected the liability in returns and discharged the duty with interest before issuance of notice, in the context of Rule 8(3A) of the Central Excise Rules, 2002.

Analysis: The duty liability had been paid before the show-cause notice and the record did not disclose any finding of fraud, collusion, wilful misstatement, suppression of facts, or contravention with intent to evade duty. For the relevant period, Rule 8(3A) only regulated the consequences of delayed payment and denial of Cenvat credit utilisation, and it did not by itself create an automatic liability to penalty under Section 11AC. Penalty under Section 11AC is attracted only when the requisite ingredients for such penalty are established.

Conclusion: Penalty under Section 11AC was not attracted and the penalty imposed on the assessee was unsustainable.

Final Conclusion: The appeal succeeded and the penalty order was set aside.

Ratio Decidendi: Penalty under Section 11AC cannot be imposed merely for delayed payment of duty under Rule 8(3A) unless the statutory ingredients of fraud, collusion, wilful misstatement, suppression of facts, or intent to evade duty are established.

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