Excise penalty requires proof of fraud or intent to evade; pre-notice payment alone does not justify penalty.

Penalty under the Central Excise regime cannot be sustained merely because duty and wrongly availed credit were deposited before the show cause notice. Liability depends on proof of the statutory ingredients of fraud, collusion, wilful misstatement, suppression of facts, or contravention with intent to evade duty. Where the authorities record no factual finding establishing those elements, the penalty provision does not apply, even if payment was made before notice. On the facts stated, no such finding existed and the duty had already been paid, so penalty and interest were not leviable.

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Issues: Whether penalty and interest under the Central Excise law were leviable when the duty and wrongly availed credit had been deposited before issuance of the show cause notice, in the absence of a finding of fraud, collusion, wilful misstatement, suppression of facts, or intent to evade duty.

Analysis: Liability to penalty under the excise provisions depends upon the existence of the statutory conditions, namely fraud, collusion, wilful misstatement, suppression of facts, or contravention with intent to evade duty. Mere prior payment or deposit of duty before the show cause notice does not by itself exclude penalty in every case, but where the authorities record no finding that such ingredients existed, the penalty provision cannot be invoked. The Court applied the settled position that the question of intent to evade is factual, and in the present case there was no finding of fraud or misrepresentation; the duty had already been paid before the notice.

Conclusion: Penalty and interest were not leviable on the facts found, and the revenue appeal failed.

Ratio Decidendi: Penalty under the excise regime cannot be sustained merely because duty is paid before the show cause notice unless the statutory ingredients of fraud, collusion, wilful misstatement, suppression of facts, or intent to evade duty are established by a finding of fact.

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