Reduced penalty under Section 11AC depends on timely payment of duty, interest and penalty within the statutory period.

Reduced penalty under the first proviso to Section 11AC of the Central Excise Act, 1944 is available only if the assessee pays the determined duty, interest and reduced penalty within thirty days of communication of the adjudication order. On the stated facts, the assessee continued to contest the demand on merits, did not make timely payment, and did not show any real intention to invoke the statutory concession. The absence of an express recital in the adjudication order did not create an entitlement to the reduced penalty or invalidate the penalty order. The penalty was therefore upheld and no interference was called for.

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Issues: Whether the assessee was entitled to the benefit of the first proviso to Section 11AC of the Central Excise Act, 1944 despite not having paid the duty, interest and reduced penalty within the prescribed time and despite the adjudication order not expressly spelling out that option.

Analysis: The appeal turned on the operation of Section 11AC and its first proviso, under which the penalty can be reduced to 25% only when the duty determined, the interest payable thereon, and the reduced penalty are paid within thirty days from communication of the adjudication order. The assessee had consistently contested the demand on merits, did not seek to make such payment at the earliest stage, and had not shown any real intention to avail the statutory concession. The earlier decision relied upon by the assessee was distinguished on facts, since in that case the duty had already been paid. On these facts, the absence of an explicit recital in the adjudication order did not vitiate the penalty order or create a right to reduced penalty in favour of the assessee.

Conclusion: The assessee was not entitled to the benefit of the first proviso to Section 11AC, and the penalty order did not call for interference. The appeal failed.

Ratio Decidendi: The reduced-penalty benefit under the first proviso to Section 11AC is available only upon timely payment of duty, interest and reduced penalty, and cannot be claimed by an assessee who did not act to avail the statutory option within time.

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