Mandatory penalty under Section 11AC applies with a preserved right to reduced penalty on timely payment.

Section 11AC was treated as mandating a penalty equal to the duty confirmed where clandestine removal is established, leaving no adjudicatory discretion to impose a lesser penalty. The Tribunal therefore applied the mandatory penalty principle and aligned the penalty with the duty demand. At the same time, the first and second provisos to Section 11AC were given effect by preserving the assessee's statutory option to pay a reduced penalty of 25% if duty, interest, and the reduced penalty were paid within thirty days of communication of the order. The earlier denial of that option did not extinguish the statutory benefit where the provisos remained available.

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Issues: Whether, on invocation of Section 11AC for clandestine removal, the penalty was required to be equal to the duty confirmed, and whether the assessee could still be given the statutory option of reduced penalty payment within the prescribed time.

Analysis: The penalty had earlier been reduced, but the governing principle after the Supreme Court decision on Section 11AC was that once the provision is attracted the adjudicating authority has no discretion to impose a lesser penalty. The penalty was therefore enhanced to the amount of duty confirmed. At the same time, the first and second provisos to Section 11AC preserved the statutory entitlement to reduced penalty where duty, interest, and the reduced penalty are paid within thirty days of communication of the order. The Tribunal also applied the approach reflected in later High Court decisions that denial of such option at the earlier stage should not deprive the assessee of the statutory benefit when the law permits it.

Conclusion: The penalty was held to be equal to the duty confirmed, but the assessee was granted the option to avail the statutory reduced penalty of 25% if the prescribed payment was made within thirty days.

Final Conclusion: The order restored the mandatory penalty principle under Section 11AC while preserving the assessee's conditional right to the reduced penalty benefit under the provisos.

Ratio Decidendi: Where Section 11AC applies, penalty is ordinarily coextensive with the duty confirmed, but the statutory provisos permitting reduced penalty on timely payment must still be given effect.

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