Mandatory equal penalty under Section 11AC applies once intent to evade duty is established

Penalty under Section 11AC of the Central Excise Act, 1944 is attracted only where short levy or non-levy results from fraud, collusion, wilful misstatement, suppression of facts, or contravention with intent to evade duty. The Court held that this mens rea-based precondition must exist before penalty can be imposed, but once established, the provision prescribes an equal penalty and leaves no discretion to reduce the quantum. The Tribunal was therefore not justified in treating the penalty as discretionary; if penalty is leviable under Section 11AC, it must be equal to the duty determined.

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Issues: Whether penalty under Section 11AC of the Central Excise Act, 1944 is mandatory at the rate of duty equal to the duty determined, or whether the Tribunal has discretion to reduce the quantum of penalty once the statutory conditions for levy are satisfied.

Analysis: Section 11AC applies only where short levy or non-levy is attributable to fraud, collusion, wilful misstatement, suppression of facts, or contravention with intent to evade duty. The judgment holds that the statutory precondition of mens rea must exist before penalty can be imposed, but once that condition is established, the language of the provision leaves no room for discretion in fixing the amount. The Court distinguishes authorities dealing with discretionary or maximum penalties and concludes that the plain wording of Section 11AC prescribes an equal penalty, not merely a ceiling.

Conclusion: The Tribunal was not justified in reducing the penalty; if penalty is found leviable under Section 11AC, it must be equal to the duty determined.

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