Mandatory excise penalty under Section 11AC cannot be reduced, but statutory preconditions must still be examined on facts.

Section 11AC of the Central Excise Act imposes a mandatory penalty once fraud, collusion, wilful misstatement, suppression of facts, or intent to evade duty is established, and adjudicating authorities have no discretion to reduce it below the prescribed amount. The Delhi High Court, applying Supreme Court guidance, held that the penalty could not be reduced below the duty-related amount where the statutory conditions are satisfied. However, because the Tribunal and Commissioner (Appeals) had not examined whether those preconditions were actually made out on the facts, the order reducing the penalty was set aside and the matter remitted for that determination.

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Issues: Whether the penalty under Section 11AC of the Central Excise Act, 1944 can be reduced below the duty determined under Section 11A(2) of the Central Excise Act, 1944, and whether the matter required reconsideration on satisfaction of the statutory preconditions for such penalty.

Analysis: The Court applied the principle that Section 11AC prescribes mandatory penalty once the statutory ingredients are established. Relying on the Supreme Court's exposition, it held that adjudicating authorities have no discretion to impose a lesser penalty than the amount payable where the conditions of fraud, collusion, wilful misstatement, suppression of facts, or contravention with intent to evade duty are satisfied. At the same time, the record showed that neither the Tribunal nor the Commissioner (Appeals) had examined whether those preconditions were in fact made out on the facts of the case.

Conclusion: The question was answered against the assessee and in favour of the Revenue on the legal position that penalty under Section 11AC cannot be reduced below the prescribed amount. The Tribunal's order reducing the penalty was set aside, and the matter was remitted to the Tribunal to determine whether the statutory conditions for invoking Section 11AC were satisfied.

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