Reduced penalty under Section 11AC can apply to Rule 25 penalties, and no separate partner penalty was warranted.

Rule 25 penalties can take the benefit of the first proviso to Section 11AC where the statutory conditions for reduced penalty are satisfied, including payment within the prescribed period with interest. On the facts, the penalty was restricted to 25% of the duty determined because the duty demand had been adjusted and the concessional mechanism applied. A separate penalty on the partner under Rule 26 was not warranted, as the partner's exposure was treated as merged with the firm's joint and several liability for the firm's penalty.

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Issues: (i) Whether the reduced penalty benefit under the first proviso to Section 11AC of the Central Excise Act, 1944 was available where penalty was imposed under Rule 25 of the Central Excise Rules, 2001. (ii) Whether a separate penalty could be sustained on the partner under Rule 26 of the Central Excise Rules, 2001.

Issue (i): Whether the reduced penalty benefit under the first proviso to Section 11AC of the Central Excise Act, 1944 was available where penalty was imposed under Rule 25 of the Central Excise Rules, 2001.

Analysis: The order held that Rule 25 is subject to Section 11AC of the Central Excise Act, 1944 and that the proviso to Section 11AC applies to cases where duty is determined under Section 11A(2) and paid within the stipulated period along with interest. The facts showed clandestine removal, but the assessee had already paid 25% of the duty towards penalty before the show cause notice and the confirmed duty demand was adjusted accordingly.

Conclusion: The penalty was liable to be restricted to 25% of the duty determined, and the reduction was available to the assessee.

Issue (ii): Whether a separate penalty could be sustained on the partner under Rule 26 of the Central Excise Rules, 2001.

Analysis: The liability of the partner under Rule 26 was treated as distinct, but once penalty was sustained on the partnership firm, the partner was held jointly and severally liable for the firm's penalty, and no separate penalty was warranted on him.

Conclusion: No separate penalty was imposed on the partner.

Final Conclusion: The firm's penalty was reduced to the statutory concessional amount, and the partner escaped a separate penalty because his liability merged with the firm's joint and several liability for payment of the firm's penalty.

Ratio Decidendi: Where Rule 25 is expressly subject to Section 11AC, the concessional penalty mechanism in the first proviso to Section 11AC can apply to penalties under Rule 25 if the statutory conditions for reduced penalty are satisfied, and a separate penalty on a partner is unnecessary where the firm's penalty is otherwise sustained and recoverable jointly and severally.

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