Wilful suppression and intent to evade duty are required before excise interest and penalty can be sustained.

Interest under Section 11AB and penalty under Section 11AC of the Central Excise Act are not attracted unless the evidence establishes wilful suppression of facts with intent to evade duty. On the facts discussed, the non-passing on of part of an ATW discount was linked to delayed reconciliation of accounts across sales offices and distribution centres, with discount otherwise being passed on under a uniform credit scheme after payment and reconciliation. As the material accepted by the adjudicating authority did not show deliberate suppression or evasion intent, the commentary concludes that both the interest demand and penalty were unsustainable.

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Issues: Whether the demand of interest under Section 11AB of the Central Excise Act and penalty under Section 11AC of the Central Excise Act were sustainable in the absence of wilful suppression of facts with intent to evade duty.

Analysis: The dispute arose from non-passing on of a part of the ATW discount to dealers. The appellant had adopted a scheme under which discount was passed on after reconciliation of accounts and after receipt of payment, with uniform credit allowed to dealers. The record showed that the shortfall in passing on the discount was attributable to delay in reconciliation across multiple sales offices and distribution centres. On the facts accepted by the adjudicating authority, the material was insufficient to establish deliberate suppression or an intention to evade duty.

Conclusion: The demand of interest under Section 11AB and the penalty under Section 11AC were unsustainable and were set aside in favour of the assessee.

Ratio Decidendi: Interest and penalty under the excise law provisions invoked are not attracted unless wilful suppression of facts with intent to evade duty is established on the evidence.

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