Mandatory daily penalty under excise rules cannot be reduced where the proviso only caps aggregate liability.

Rule 173GG(3) prescribed a fixed daily penalty for delayed duty payment, and the proviso operated only as a ceiling on the aggregate of duty, interest and penalty. On that construction, the daily penalty was the minimum mandatory liability, so neither the adjudicating authority nor the Tribunal had discretion to reduce it below the prescribed amount. The reference to Section 11AC of the Central Excise Act did not alter that position, and the cited precedent supported the same interpretation. The penalty was therefore sustained in full, with no discretionary reduction permissible.

---

---

Issues: Whether the penalty of Rs. 500 per day under Rule 173GG(3) of the Central Excise Rules, 1944 was a minimum mandatory penalty, and whether the adjudicating authority or Tribunal had discretion to reduce it.

Analysis: Rule 173GG(3) required payment of duty by the due date, with interest for the period of default and a penalty of Rs. 500 per day. The proviso only limited the aggregate of duty, interest and penalty by the value of clearances for the relevant month. On this construction, the penalty prescribed by the main part of the rule was the minimum liability, while the proviso operated only as a maximum ceiling. The quantum already imposed was the minimum prescribed by the rule, leaving no scope for reduction by the authorities or the Tribunal. The reference to Section 11AC of the Central Excise Act, 1944 did not assist the assessee, and the cited precedent on reduction of penalty under a different rule supported the same view.

Conclusion: The penalty under Rule 173GG(3) could not be reduced below Rs. 500 per day, and the impugned penalty was rightly sustained against the assessee.

Final Conclusion: The appeal failed because the penalty imposed was within the mandatory framework of the rule and no discretionary reduction was permissible.

Ratio Decidendi: Where a fiscal rule prescribes a fixed daily penalty for default and a proviso only caps the aggregate liability, the prescribed daily penalty is mandatory and cannot be reduced below that minimum in the exercise of discretion.

---