Per Justice K.K. Usha : In this appeal at the instance of the assessee the main challenge against the order passed by the Commissioner dated 10.10.97 is against the imposition of fine.

2. The appellant is a manufacturer of Oxygen gas. It supplies Oxygen gas through pipeline to M/s. Ispat Profiles IndiaLtd. (hereinafter referred to as IPIL). The appellant's factory is set up in the premises of IPIL. A show cause notice dated 5.3.97 was issued to the appellant demanding Central Excise duty amounting to Rs. 27,76,542.89 for the period from 1.3.94 to 30.11.96 on the ground that the value charged by them from M/s. IPIL was less to the extent of free of supply of water and power. It was further alleged that they were charging Rs. 1.50 per NM3 less from M/s. IPIL in comparison to other buyers in the course of wholesale trade. According to the Revenue the appellant deliberately, knowingly and intentionally did not disclose the fact that M/s. IPIL had supplied electricity and industrial grade water free of cost. It is alleged that the appellant suppressed these facts with intention to evade payment of excise duty. The show cause notice contained a proposal for imposition of penalty under Section 11AC, a demand of interest under Section 11AB and also a proposal for confiscation of land, building, plant, material, etc. under Rule 173-Q of the Central Excise Rules. The assessee took the contention that they had not deliberately, knowingly or intentionally suppressed any facts. They had entered into an agreement on 3.8.89 with IPIL for manufacture and supply of Oxygen, that one of the conditions of the agreement was that they would supply on sale the entire requirement of Oxygen having 99.5% purity @ Rs. 2.90 per NM3 provided IPIL give entire requirement of power and water free of cost at the site. During the period prior to 1994-95 the rate of duty on Oxygen was specific or quantity based and not ad valorem. It was in the Budget for 1994-95 the duty liability was made ad valorem. The agreement was reviewed on 1.7.95 with the same terms. Even though the departmental officers had examined the records of the petitioner's plant on several occasions, they had not pointed out any mistake. Therefore, the appellant continued to compute the assessable value without taking into consideration the cost of water and power. There was no malafide intention to suppress the above fact. They paid the entire amount of duty willingly as soon as the mistake/omission was pointed out before issue of show cause notice, even though according to the assessee a part of the demand was barred by limitation. Under these circumstances, the appellant would contend that there is no justification in imposing the penalty. It was also contended that the provisions of Sections 11AC and 11AB had not been brought into force during the entire period of demand. Therefore, there could be no demand of penalty or interest under the above provisions.

3. The Commissioner was not inclined to accept the above contention raised by the appellant. He took the view that the fact thatM/s. IPIL had been supplying power and water free of cost, has not been brought to the notice of the department by the assessee at any point of time. There was no occasion for the officers of the department to examine the terms of the agreement. Even though it is alleged that copy of the agreement was made available to the officers, it was held that there is no evidence to support the above claim. The Commissioner further took the view that the assessee paying duty before the show cause notice was issued, will not entitle it to contend that there is no liability to pay penalty. Once it is found that there was suppression of material fact with intention to evade duty the assessee will be fastened with liability to pay penalty. The Commissioner rejected the contention of the assessee that the provisions of Sections 11AB and 11AC are not attracted.

4. Before us the main thrust of the argument on behalf of the ap