Reduced penalty under Section 11AC can still be granted at appellate stage when earlier authorities omitted the statutory option.

Where Section 11AC of the Central Excise Act applies, the assessee is entitled to the statutory option of reduced penalty on payment of duty, interest and 25% of the penalty within the prescribed 30 days. The Gujarat HC held that, although the adjudicating authority and first appellate authority had not granted that option, the Tribunal could still extend the benefit in accordance with the settled line of decisions. The Tribunal's direction allowing payment of the reduced penalty within 30 days was therefore upheld, and the Revenue's challenge failed.

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Issues: Whether the Tribunal could grant the assessee the option to pay duty, interest and 25% of the penalty within 30 days when such option had not been granted by the adjudicating authority or the first appellate authority under Section 11AC of the Central Excise Act, 1944.

Analysis: The Court followed its earlier view that the benefit of reduced penalty under Section 11AC is to be extended by the adjudicating authority when the assessee is called upon to pay duty, interest and 25% penalty within 30 days of adjudication. Where no such option had been given by the authorities below, the proper course was to remit the matter so that the statutory option could be considered in accordance with law. Since the Tribunal, while otherwise sustaining the demand, granted the assessee the benefit of paying 25% penalty within 30 days, its approach was consistent with the settled line of decisions referred to by the Court.

Conclusion: The Tribunal's direction granting the option of reduced penalty was upheld, and the challenge by the Revenue failed.

Ratio Decidendi: Where Section 11AC applies, the assessee is entitled to the statutory benefit of reduced penalty if the duty, interest and 25% penalty are paid within the prescribed time, and such option may be recognised even at the appellate stage where it was not granted earlier.

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