Mens rea is essential for excise penalty under Section 11AC when no intention to evade duty is shown.

Penalty under Section 11AC of the Central Excise Act is attracted only when the record shows an intention to evade duty. Payment of the short-levied duty before issuance of the show cause notice is not conclusive by itself, but where the adjudicating authority, appellate authority and Tribunal do not disclose any mens rea, penalty is not warranted. On the facts found, there was no material to show the Tribunal's view was illegal or perverse, so the revenue's challenge failed.

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Issues: Whether penalty under Section 11AC of the Central Excise Act, 1944 was leviable where the duty short-levied had been deposited before issuance of show cause notice and the record did not establish any intention to evade duty.

Analysis: Penalty under Section 11AC is attracted only where the requisite mens rea is shown. Mere payment of duty before the show cause notice is not by itself conclusive, but where the findings of the adjudicating authority, the appellate authority and the Tribunal do not disclose any element of intention to evade, penalty cannot be said to be warranted. The Court found no material to show that the Tribunal's view was illegal or perverse.

Conclusion: Penalty under Section 11AC was not justified on the facts found, and the revenue's challenge failed.

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