Penalty discretion under Central Excise law may be limited when duty demand is remanded and the issue becomes academic.

The commentary explains that where a central excise duty demand is remanded for redetermination, the related penalty under section 11AC may also remain open, and the Tribunal may cap the penalty at a specified percentage of the duty demand when the governing provision confers discretion. It further notes that, once section 11AC was later substituted by the Finance Act, 2011, the controversy over the Tribunal's power became academic. The discussion therefore treats the Tribunal's approach as legally supportable in the circumstances and highlights the limited scope for interference when penalty follows a remanded demand.

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Issues: Whether the Tribunal had power to limit the penalty under section 11AC of the Central Excise Act, 1944, when the demand was remanded for redetermination and the extended period of limitation had been invoked on the ground of suppression of facts.

Analysis: The demand itself had been remanded for re-determination, so the quantum of duty and the consequential penalty were yet to be finally worked out. The Tribunal had directed that the penalty should not exceed 10% of the duty demand, and the court noted that the amended provision permitted such discretion in the circumstances. The court also observed that the question raised had become academic because section 11AC was later substituted by Finance Act, 2011 with different penalty provisions.

Conclusion: The Tribunal's order did not suffer from any infirmity, and the challenge to its power to restrict the penalty did not warrant interference.

Final Conclusion: The appeals failed and were dismissed, leaving the Tribunal's approach intact.

Ratio Decidendi: Where the duty demand is remanded for redetermination and the governing provision confers discretion as to penalty, the appellate court will not interfere with a Tribunal order limiting penalty, especially when the issue has become academic due to subsequent statutory substitution.

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