Mandatory excise penalty cannot be reduced after statutory conditions are met, though reduced-payment benefit may still apply.

Where clandestine manufacture and clearance of excisable goods was found, the Tribunal held that the mandatory penalty could not be reduced once the statutory conditions for levy under the excise law were satisfied. The appellate authority's reduction of the penalty was therefore set aside and the original penalty restored, while the assessee remained entitled to the statutory option of paying 25% of the penalty if the prescribed conditions were fulfilled. The personal penalty on the Director was not interfered with because the record showed his involvement in the clandestine activity, and that finding was upheld.

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Issues: (i) Whether the mandatory penalty imposed under Section 11AC of the Central Excise Act, 1944 could be reduced by the appellate authority. (ii) Whether personal penalty on the Director under Rule 209A of the Central Excise Rules, 2002 was liable to be interfered with.

Issue (i): Whether the mandatory penalty imposed under Section 11AC of the Central Excise Act, 1944 could be reduced by the appellate authority.

Analysis: The demand and penalty were based on a finding of clandestine manufacture and clearance of excisable goods. The appellate authority had accepted the assessee's involvement but reduced the statutory penalty from the amount imposed by the adjudicating authority. The Tribunal held that the penalty under Section 11AC is mandatory in nature and, in view of the governing legal position, the reduction of such penalty was not justified.

Conclusion: The reduction of the mandatory penalty was set aside and the penalty imposed by the adjudicating authority was restored, while the assessee was held entitled to exercise the option to pay 25% of the penalty subject to the statutory conditions.

Issue (ii): Whether personal penalty on the Director under Rule 209A of the Central Excise Rules, 2002 was liable to be interfered with.

Analysis: The record showed the Director's role in the clandestine activity, and the appellate authority had already considered his involvement while sustaining a reduced personal penalty. No reason was found to disturb that finding.

Conclusion: The personal penalty on the Director was upheld.

Final Conclusion: The assessee's appeal succeeded only to the limited extent of obtaining the statutory option linked to the restored penalty, while the challenge to the personal penalty failed and the Revenue's challenge to reduction of the statutory penalty succeeded.

Ratio Decidendi: A penalty imposed under Section 11AC of the Central Excise Act, 1944 cannot be reduced once the statutory conditions for its levy are satisfied, though the assessee may still be entitled to the benefit of the prescribed reduced-payment option if the statutory requirements are met.

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