Section 11AC penalty cannot be imposed when short duty is paid before notice and no suppression of facts is found.

Penalty under Section 11AC of the Central Excise Act, 1944 is attracted only when the statutory preconditions such as suppression, fraud, or equivalent culpable conduct are established. Where the assessee reversed CENVAT credit and paid the short duty before the show cause notice, and the adjudicating authority found no suppression of facts or other contravention, penalty could not be imposed. The prior allegation in the notice, by itself, was insufficient to trigger Section 11AC.

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Issues: Whether penalty under Section 11AC of the Central Excise Act, 1944 was leviable where the assessee paid the short duty before issuance of the show cause notice and the adjudicating authority found no suppression of facts.

Analysis: Penalty under Section 11AC is attracted only when the statutory preconditions for its invocation are established. On the facts found, the assessee had reversed the CENVAT credit and paid the duty before the show cause notice was issued. The adjudicating authority also recorded a finding that there was no contravention, suppression of facts, or other circumstance attracting Section 11AC. In these circumstances, the mere existence of an earlier allegation in the notice did not justify penalty.

Conclusion: Penalty under Section 11AC was not imposable, and the issue was answered in favour of the assessee.

Ratio Decidendi: Where the short duty is paid before issuance of the show cause notice and the findings do not establish suppression, fraud, or equivalent circumstances, penalty under Section 11AC cannot be imposed.

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