Section 11AC penalty fails without suppression of facts; nominal penalty on pre-notice duty payment was retained.

Penalty for alleged non-reversal of Cenvat credit on capital goods sent for job work could not be sustained under Section 11AC because the appellate finding of no suppression of facts, and no intent to evade duty, remained unchallenged; the larger penalty was therefore set aside. The differential duty had already been paid before the show-cause notice, yet a nominal penalty of Rs. 5,000 was retained, and the Revenue's request to enhance it was declined. The departmental appeal thus failed in full, leaving the order in place on both penalty issues.

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Issues: (i) Whether the penalty of Rs. 73,470 imposed for alleged non-reversal of Cenvat credit on capital goods sent for job work was sustainable under the extended period and Section 11AC. (ii) Whether the remaining penalty of Rs. 5,000, and the Revenue's prayer for enhancement, were sustainable in relation to the differential duty of Rs. 5,011 paid before the show-cause notice.

Issue (i): Whether the penalty of Rs. 73,470 imposed for alleged non-reversal of Cenvat credit on capital goods sent for job work was sustainable under the extended period and Section 11AC.

Analysis: The appellate authority had recorded that no suppression of facts was made out, and that the movement of capital goods for job work and the non-receipt of the job-worked goods within the prescribed period were already on record. The Revenue did not challenge that finding. In the absence of suppression and intent to evade duty, the foundation for penalty under Section 11AC did not survive.

Conclusion: The penalty of Rs. 73,470 was not sustainable and remained set aside.

Issue (ii): Whether the remaining penalty of Rs. 5,000, and the Revenue's prayer for enhancement, were sustainable in relation to the differential duty of Rs. 5,011 paid before the show-cause notice.

Analysis: The differential duty was not contested and had been paid before issue of the show-cause notice. The appellate authority nevertheless retained a nominal penalty of Rs. 5,000. In the Revenue's appeal, only an enhancement of Rs. 11 was sought, which did not call for interference. The impugned order therefore stood on this aspect as well.

Conclusion: The retained penalty of Rs. 5,000 was sustained and enhancement was declined.

Final Conclusion: The departmental appeal failed in full, and the appellate order deleting the larger penalty while retaining the smaller penalty was upheld.

Ratio Decidendi: Penalty under Section 11AC cannot be sustained absent suppression of facts or intent to evade duty, and a finding of no suppression, if unchallenged, is ative against Revenue's claim for restoration of penalty.

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