Mandatory penalty under Central Excise law cannot be reduced below duty evaded once Section 11AC applies.

Section 11AC of the Central Excise Act, 1944 was treated as a mandatory penalty provision for intentional evasion, requiring penalty equal to the duty evaded once its conditions were satisfied. The Tribunal had no discretion to reduce the penalty below that amount, and any such reduction was contrary to law. On that basis, the appellate interference was justified and the order reducing penalty on the assessee was set aside to that extent.

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Issues: (i) Whether penalty under Section 11AC of the Central Excise Act, 1944 could be reduced below the duty evaded amount; (ii) whether the reduction of penalty by the Tribunal was legally sustainable.

Issue (i): Whether penalty under Section 11AC of the Central Excise Act, 1944 could be reduced below the duty evaded amount.

Analysis: The applicable scheme treated Section 11AC as a stringent penal provision for cases of intentional evasion. Once the conditions for its application were satisfied, the authority was bound to impose penalty equivalent to the duty determined as evaded. The Court followed the settled view that no discretion survived to impose a lesser quantum of penalty under that provision.

Conclusion: The issue was answered in favour of the Revenue. The Tribunal had no discretion to reduce the penalty below the duty evaded.

Issue (ii): Whether the reduction of penalty by the Tribunal was legally sustainable.

Analysis: Since Section 11AC mandated penalty equal to the duty evaded, the Tribunal's reduction of the penalty amount was contrary to law. The consequence followed from the answer to the first issue, and the impugned reduction could not stand.

Conclusion: The issue was answered in favour of the Revenue. The Tribunal's reduction of penalty was unsustainable.

Final Conclusion: The appellate interference was warranted, and the Tribunal's order was set aside to the extent it reduced the penalty imposed on the assessee.

Ratio Decidendi: Where Section 11AC of the Central Excise Act, 1944 applies, the penalty is mandatory and equivalent to the duty evaded, leaving no discretion to impose a lesser penalty.

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