Reduced penalty under Central Excise law applies when duty is paid before adjudication and statutory conditions are met.

Penalty under Section 11AC of the Central Excise Act was confined to 25% of the duty already paid and appropriated, because the duty and interest were deposited before adjudication and the statutory concession for reduced penalty applied. Where duty is determined on allegations of fraud, wilful misstatement or suppression, Section 11AC generally contemplates equal penalty, but it permits the lower penalty when the prescribed payment condition is satisfied. The adjudicating authority was therefore correct in restricting the penalty to the reduced amount, and the Revenue's challenge to that approach failed.

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Issues: Whether penalty under Section 11AC of the Central Excise Act, 1944 was required to be equal to the entire duty demand, or whether penalty at 25% of the duty already paid and appropriated was permissible when the duty amount had been deposited before adjudication.

Analysis: Section 11AC provides for equal penalty where duty is confirmed on account of fraud, wilful mis-statement or suppression, but it also contains a statutory concession where the duty determined along with interest is paid within the prescribed period, in which case the penalty is restricted to 25% of the duty so determined. In the present matter, the duty amount had already been paid before the adjudication order and was appropriated in that order. The penalty was therefore computed only on the amount already paid, and the adjudicating authority committed no error in applying the reduced statutory penalty.

Conclusion: The penalty of 25% on the duty already paid was valid, and the Revenue's challenge to the reduced penalty failed.

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