Reduced penalty under Section 11AC applies when duty is paid before notice and the statutory option must be granted in time.

Where duty was paid before issuance of the show cause notice and the conditions of the proviso to Section 11AC of the Central Excise Act were attracted, the assessee was entitled to the statutory option to discharge reduced penalty. The lower authorities erred in not extending the benefit of 25% penalty, and the order records that this option should have been made available within the prescribed time. The operative consequence stated is that the assessee could pay 25% of the duty as penalty within 30 days of communication of the order, failing which the full 100% penalty would remain payable.

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Issues: Whether, where duty had been paid before issuance of the show cause notice, the assessee was entitled to the statutory option to pay reduced penalty under Section 11AC of the Central Excise Act, 1944.

Analysis: The lower authorities did not extend the option to pay 25% of the duty confirmed as penalty under the proviso to Section 11AC. The order records that such option ought to have been granted, and the assessee was therefore entitled to the benefit of reduced penalty on payment within the prescribed time.

Conclusion: The assessee was entitled to be given the option to pay 25% of the duty as penalty within 30 days of communication of the order, failing which 100% penalty would remain payable.

Ratio Decidendi: Where the conditions for the proviso to Section 11AC are attracted, the adjudicating authority must extend the statutory option of reduced penalty within the prescribed period.

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