Prospective application of penal excise penalty bars retrospective use of section 11AC for earlier conduct.

Section 11AC of the Central Excise Act, being a penal provision, applies prospectively and cannot be invoked for short payment of duty completed before its insertion on 28-9-1996. A departmental circular cannot extend the provision to antecedent conduct merely because the show cause notice was issued later, and the appellate authority is not bound by such a circular in exercising appellate functions. The operative principle is that a penal fiscal provision does not operate retrospectively unless the statute clearly so provides, so penalty was not imposable for the prior period.

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Issues: Whether penalty under section 11AC of the Central Excise Act, 1944 could be imposed for alleged short payment of duty committed before the insertion of that provision, and whether departmental circulars could make the provision applicable to such prior conduct.

Analysis: Section 11AC was inserted on 28-9-1996 and, being a penal provision, could not be applied to acts completed before its insertion. The view that a departmental circular could extend the provision to cases where show cause notices were issued after the insertion was not accepted. The appellate authority was also not bound by such a circular in the exercise of appellate functions. The controlling principle applied was that a penal provision does not operate retrospectively unless the statute clearly so provides.

Conclusion: Penalty under section 11AC was not imposable for the period prior to its enactment, and the assessee succeeded on this issue.

Final Conclusion: The penalty order was unsustainable in law because the penal provision could not be applied to antecedent conduct.

Ratio Decidendi: A penal fiscal provision applies prospectively unless the statute clearly makes it retrospective, and prior conduct cannot be penalised under a provision inserted after the alleged default.

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