Penalty cap provisions allow discretion to impose a lesser penalty when the statute says "not exceeding".

Rule 15(1) of the Cenvat Credit Rules, 2002 was interpreted as prescribing only a maximum penalty through the words "not exceeding", not a mandatory penalty at the full statutory limit or equal to the duty amount. The adjudicating authority therefore retains discretion to impose a lesser penalty within the ceiling, depending on the facts. The commentary relies on the same approach adopted in a Larger Bench decision on similarly worded penalty provisions. On that basis, a penalty reduction by the Commissioner (Appeals) was considered legally permissible, and the Revenue's challenge was rejected.

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Issues: Whether the penalty for wrong availment of Cenvat credit under Rule 15 of the Cenvat Credit Rules, 2002 is mandatory at the maximum prescribed limit or can be imposed at a lesser amount within the statutory ceiling.

Analysis: Rule 15(1) prescribes only an upper limit for penalty, expressed by the words "not exceeding", and therefore does not mandate that the penalty must invariably equal the amount of duty or the statutory maximum. The provision permits the adjudicating authority to impose any penalty within that ceiling, depending on the facts of the case. The view was supported by the Larger Bench decision interpreting similarly worded penalty language under the Central Excise Rules, 2002. Since the Commissioner (Appeals) reduced the penalty within the permissible limits, no legal infirmity was shown in that exercise of discretion.

Conclusion: The reduction of penalty was valid and the Revenue's challenge failed.

Ratio Decidendi: Where a penalty provision uses the expression "not exceeding", it fixes only a maximum limit and leaves discretion to impose a lesser penalty within that limit.

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