Mandatory penalty under Section 11AC cannot be reduced below duty once statutory conditions are met

Penalty under Section 11AC of the Central Excise Act was treated as mandatory once the statutory conditions were satisfied, leaving no discretion to reduce it below the duty determined under the Act. The Madras High Court followed the settled position, including Supreme Court authority, that the penalty cannot be scaled down merely because an equal penalty is considered harsh. The Tribunal's reduction of the penalty from an amount equal to duty to a lesser sum was therefore held to be contrary to the statutory mandate and was set aside in favour of the Revenue.

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Issues: Whether the Tribunal was justified in reducing the penalty imposed under Section 11AC of the Central Excise Act from the amount equal to duty to a lesser sum.

Analysis: The penalty under Section 11AC is mandatory once the statutory conditions are attracted. The Court followed the settled position that the authority has no discretion to scale down the penalty below the duty determined under the Act. Reduction of the penalty on the ground that the equal amount was harsh was therefore contrary to the statutory mandate. The Court also noted that the issue was covered by the Supreme Court decisions on the mandatory nature of penalty under Section 11AC.

Conclusion: The reduction of penalty by the Tribunal was held to be unlawful and was set aside in favour of the Revenue.

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