Section 11AC penalty cannot apply retrospectively; matter remanded for fresh consideration under Rule 173Q.

Penalty under Section 11AC of the Central Excise Act, 1944 was held inapplicable to demands relating substantially to a period before 28-9-1996, so the penalty imposed on that basis could not be sustained. Because the show cause notice had also invoked Rule 173Q of the Central Excise Rules, 1944, the matter was remanded for fresh consideration of penalty under that alternative provision, with observance of natural justice.

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Issues: Whether penalty under Section 11AC of the Central Excise Act, 1944 could be imposed for the period prior to its commencement, and whether the matter should be reconsidered for penalty under Rule 173Q of the Central Excise Rules, 1944.

Analysis: The penalty provision under Section 11AC was held to be inapplicable to demands relating substantially to a period preceding 28-9-1996. Since the show cause notice had invoked both Section 11AC and Rule 173Q, the penalty part of the order under Section 11AC could not be sustained. The matter required fresh consideration on the alternative penalty provision, with observance of the principles of natural justice.

Conclusion: Penalty under Section 11AC was set aside, and the matter was remanded for reconsideration of penalty under Rule 173Q of the Central Excise Rules, 1944.

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