Section 11AC penalty cannot be reduced by general discretion, except within the limited statutory proviso.

Once penalty under Section 11AC of the Central Excise Act, 1944 is attracted, the authority has no general discretion to reduce it below the duty determined. A reduced penalty of 25% is available only if the statutory conditions are satisfied within the prescribed time after determination, and that limited exception cannot be expanded by reference to a different enactment or case-specific concession. The larger bench view requiring penalty equal to the duty determined therefore remains applicable, and a Commissioner (Appeals) cannot substitute a lower penalty outside the proviso.

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Issues: Whether penalty under Section 11AC of the Central Excise Act, 1944 could be reduced below the duty determined, and whether the Commissioner (Appeals) was justified in substituting a reduced penalty for the penalty imposed by the adjudicating authority.

Analysis: Once penalty under Section 11AC is attracted, the provision does not confer discretion to impose a lesser penalty except to the limited extent expressly provided by the proviso. The reduced penalty of 25% is available only on satisfaction of the statutory conditions within the stipulated time after determination. A decision dealing with a different enactment and a concession specific to that case cannot control the interpretation of Section 11AC. The Larger Bench view that penalty equal to the duty determined is required where Section 11AC applies remained unaffected.

Conclusion: The reduction of penalty by the Commissioner (Appeals) was not warranted. The penalty equal to the duty determined was correctly restored, and the issue is decided in favour of the Revenue.

Final Conclusion: The appeal succeeds and the original penalty order is reinstated because Section 11AC permits reduction only within the narrow statutory exception, not by general discretion.

Ratio Decidendi: Where penalty is warranted under Section 11AC of the Central Excise Act, 1944, the authority has no general discretion to impose a lesser penalty than the duty determined except as specifically allowed by the proviso.

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