Mandatory excise penalty under Section 11AC cannot be reduced once statutory conditions are met.

Penalty under Section 11AC of the Central Excise Act cannot be reduced by appellate discretion once the statutory conditions for its invocation are satisfied. Where inputs were removed without payment of duty and without prescribed invoices, the duty demand, interest and penalty followed under the statutory scheme, and the Tribunal was not justified in sustaining a reduction made by the Commissioner (Appeals). The Court treated Section 11AC as mandatory in such circumstances and held that the penalty could not be diluted below the duty determined under Section 11A(2).

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Issues: Whether penalty under Section 11AC of the Central Excise Act, 1944 could be reduced by the appellate authority in the face of the statutory conditions for its application.

Analysis: The dispute arose from removal of inputs without payment of duty and without the prescribed invoices, attracting demand of duty, interest and penalty. The Court applied the settled position that once the conditions for Section 11AC are satisfied, the authority has no discretion to reduce the penalty below the duty determined under Section 11A(2). The Court held that the Tribunal was not justified in upholding the reduction of penalty by the Commissioner (Appeals), because the statutory mandate under Section 11AC could not be diluted on grounds of discretion.

Conclusion: The reduction of penalty was unsustainable and the issue was answered in favour of the Revenue.

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