Mandatory penalty under Section 11AC leaves no discretion to reduce quantum once statutory conditions are satisfied.

Where the statutory conditions in Section 11AC of the Central Excise Act are established, the penalty equal to the duty determined under Section 11A is mandatory and the quantum cannot be reduced by the adjudicating authority or the appellate forum except as expressly permitted by statute. The article notes that the reduced-penalty mechanism operates only within the statutory framework and does not create a general discretion to lessen penalty once fraud, suppression, wilful misstatement, or similar intent to evade duty is proved. The comparison with Rule 173Q was held unhelpful because Section 11AC creates a fixed penalty regime.

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Issues: Whether the appellate Tribunal had jurisdiction to reduce the penalty prescribed under Section 11AC of the Central Excise Act, 1944 when the statutory conditions for levy of penalty were satisfied.

Analysis: The penalty provision in Section 11AC was construed as attracting a mandatory penalty equal to the duty determined under Section 11A once fraud, collusion, wilful misstatement, suppression of facts, or contravention with intent to evade duty was established. The Court held that the provisional mechanism for reduced penalty operates only in the circumstances expressly provided by the statute, and no further discretion can be read into the provision either in the adjudicating authority or in the appellate forum. The decisions of the Supreme Court were read to mean that Section 11AC applies only when its statutory preconditions exist, but once applicable the quantum of penalty is fixed and cannot be reduced at will. The comparison with Rule 173Q did not assist the assessee because Section 11AC contains a statutorily fixed penalty regime.

Conclusion: The Tribunal had no discretion to reduce the amount of penalty under Section 11AC, and the question was answered in favour of the Revenue.

Ratio Decidendi: Where the statutory conditions of Section 11AC are satisfied, the penalty equal to the duty determined is mandatory and neither the adjudicating authority nor the appellate authority can reduce the quantum except as expressly permitted by the statute.

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