Mandatory penalty under section 11AC follows extended-period suppression findings and must match the duty determined.

Where duty is confirmed on findings of suppression, contravention and intent to evade under the extended limitation period, penalty under section 11AC of the Central Excise Act, 1944 follows as a mandatory consequence and must correspond to the duty determined under section 11A(2). Applying Rajasthan Spinning, the CESTAT noted that once the statutory conditions for section 11AC are satisfied, penalty is not discretionary. The fact that penalty had been imposed only on part of the confirmed demand did not change the legal effect of the recorded findings. The order was therefore modified on penalty and the Revenue's challenge succeeded.

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Issues: Whether penalty equal to the duty confirmed was required to be imposed under section 11AC of the Central Excise Act, 1944 when the demand had been sustained by invoking the extended period.

Analysis: The demand had been confirmed on the basis of suppression and contravention, and the adjudicating authority had itself recorded findings attracting the proviso to section 11A(1) of the Central Excise Act, 1944 and section 11AC of the Central Excise Act, 1944. The decision in Rajasthan Spinning was applied to hold that once the statutory conditions for invoking section 11AC are satisfied, the penalty is not discretionary and must correspond to the duty determined under section 11A(2). The fact that penalty had been imposed only in respect of one part of the confirmed duty did not alter the legal consequence flowing from the admitted applicability of section 11AC to the entire duty demand found recoverable.

Conclusion: The penalty under section 11AC was required to be imposed on the full duty confirmed, and the Revenue's challenge to the reduced penalty succeeded.

Final Conclusion: The impugned order was modified in favour of the Revenue on the question of penalty, and the appeal was allowed.

Ratio Decidendi: Where duty is confirmed by invoking the extended period on findings of suppression or contravention with intent to evade duty, penalty under section 11AC of the Central Excise Act, 1944 follows as a mandatory consequence and is to be equal to the duty determined.

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