Section 11AC penalty relief allowed when duty, interest and penalty were paid promptly; excess refund could not be reversed.

Where duty, interest and the full penalty are paid within one month of communication of the adjudication order, the first and second provisos to section 11AC of the Central Excise Act limit the assessee's liability to 25% of the penalty. On that basis, the excess 75% penalty already paid was refundable, and once the refund had been sanctioned and disbursed it could not later be withdrawn on the ground taken in the impugned proceedings. The order treating the refund as inadmissible was therefore held unsustainable and set aside.

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Issues: Whether, in view of the first and second provisos to section 11AC of the Central Excise Act, 1944, the appellant was entitled to retain only 25% of the penalty and refund of the excess penalty already paid, and whether the subsequent reversal of the refund was sustainable.

Analysis: The duty, interest and the entire penalty had been paid within one month of communication of the adjudication order. On that footing, the provisos to section 11AC limited the appellant's liability to 25% of the penalty. The refund of the excess 75% penalty, once sanctioned and disbursed, could not be later disturbed on the ground taken in the impugned proceedings.

Conclusion: The appellant was entitled to refund of the excess penalty, and the order treating the refund as inadmissible was unsustainable and set aside.

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